Is holding a bunch of individual stocks proving to be a bit overwhelming? If that's how you feel, you're not alone. Smart investors keep tabs on their positions. Keeping your finger on the pulse of each position, however, can take more time than many people are able to devote to the matter these days.
Fortunately, there's a simple solution that doesn't necessarily crimp your overall returns. It may even improve them. That's buying and holding -- forever -- exchange-traded funds (ETFs) that are never out of favor for very long. Here's a closer look at three of your best bets for this kind of investment.
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SPDR S&P 500 ETF Trust
It's an oldie but a goodie: the SPDR S&P 500 ETF Trust (SPY +0.00%), intended to reflect the performance of the S&P 500 (^GSPC +0.06%) index itself. Or, if you're a fan of the Vanguard family of funds, the Vanguard S&P 500 ETF (VOO +0.00%) will accomplish the same thing.
It's a boring holding -- that's the point. It's designed to match the stock market's long-term performance, making it impossible for the fund to beat it.
The thing is, sometimes the effort to outperform the broad market is the very thing that leads an investor to underperform it. That's what data from Standard & Poor's indicates, anyway. In its most recent update of its ongoing comparative analysis, the research outfit reports that through the first half of this year, more than half of all large-cap mutual funds available to U.S. investors underperformed their benchmarks. And things look even worse the further back you look. Over the course of the prior three years, 65% of large-cap mutual fund managers have lagged the S&P 500. For the past 10 years, the underperformance rate ratchets up to 86%. It's a testament to the difficulty of beating the market, even for professionals.
NYSEMKT: SPY
Key Data Points
If you're looking to maximize your long-term gains, make the odds work in your favor by not trying to beat the market, but merely matching its long-term average annual gain of around 10%.
Invesco S&P 500 Equal Weight Technology ETF
Despite their volatility, there's no denying technology stocks have led the market since the late 1990s. And understandably so. Technology companies introduced many of the world's biggest sociocultural changes during this time, after all, like the internet, smartphones, and, most recently, artificial intelligence. And for most of this stretch, the Invesco QQQ Trust (QQQ 0.20%) has been an easy means of plugging into this progress.
It's finally encountering an inevitable problem, though. That is, a small handful of massive tech companies now account for far too much of the ETF's total value. Even with curbs on their net weightings, this fund's top-three positions -- Nvidia, Apple, and Microsoft -- currently account for more than one-fourth of QQQ's total value, while its top-10 holdings collectively make up more than half of the fund's value. This imbalance has proven fruitful of late, but it's certainly not in the spirit of index investing.
The Invesco S&P 500 Equal Weight Technology ETF (RSPT +0.30%) solves this problem.
NYSEMKT: RSPT
Key Data Points
Just as the name suggests, Invesco's S&P 500 Equal Weight Technology fund is designed to maintain equal weighting of all the technology stocks found within the S&P 500. As of the latest look, that's 70 total positions, with an average allocation of 1.4% each. The ETF's portfolio is rebalanced as needed quarterly.
Yes, this equal weighting means the fund has recently underperformed cap-weighted technology funds, which have been dragged higher by a small handful of overperforming AI-related names. RSPT should hold up better in the event of an AI bubble bursting. More importantly, it will offer you good exposure to smaller technology companies that are already positioning themselves to become the next technology titans.
ProShares Russell 2000 Dividend Growers ETF
Finally, add the ProShares Russell 2000 Dividend Growers ETF (SMDV +0.10%) to your list of simple exchange-traded funds to buy and hold for a lifetime, although the ProShares S&P Midcap 400 Dividend Aristocrats® ETF (REGL +0.19%) should perform about as well, if that suits you better. (The term Dividend Aristocrats® is a registered trademark of Standard & Poor's Financial Services, LLC.)
NYSEMKT: SMDV
Key Data Points
This position is meant to complement the other two funds in focus here by offering a couple of things that neither other ETF brings to the table.
The first of these is exposure to the mid-cap -- and even the small-cap -- sliver of the stock market. Although small caps tend to lag as a whole because too many of them never find a firm-enough footing, mid caps actually tend to outperform large caps, which makes sense. Midsize companies are often in the sweet spot of their existence, after their wobbly start-up years but before they become much bigger successes. Robinhood Markets and TKO Group are a couple of recent examples of companies that outgrew their place in the S&P 400 Mid Cap Index to become S&P 500 constituents.
The second thing the ProShares' Russell 2000 Dividend Growers fund brings to the table is, of course, dividends. This doesn't necessarily translate into any more or any less overall performance compared to the S&P 500. It does, however, smooth out much of the volatility that you'd likely experience with non-dividend holdings, making SMDV or similar REGL much easier to stick with when holding on to anything becomes tough. You'd be stepping into the former while its trailing dividend yield stands at a solid 3.33%.
