Introduction

Exchange-traded funds (ETFs) have become increasingly popular for those aiming to build a strong, long-term investment portfolio. ETFs come with numerous advantages, including the ability to diversify across a range of asset classes, lower expense ratios, and the same trading flexibility as individual stocks. They are highly efficient at managing portfolios and provide quick access to diverse portfolios, making them a preferred choice for investors seeking long-term growth.

If you want to be sure you have money in the future, you need to learn about ETFs and pick the right ones for long-term investing. This article will guide you through the nuances of investing in ETFs, focusing on the best ETFs out of the top 7 long-term options available in the market today. It covers a wide range of options, from general index funds that follow the S&P 500 to more niche funds that focus on semiconductor companies’ technological advancements. I will discuss ways to build a growth-oriented, diversified ETF portfolio that fits your risk tolerance and investment objectives with an eye towards the long term. 

Understanding ETFs for Long-Term Investing

To make sense of exchange-traded funds (ETFs) for long-term investing, you need to know the different kinds of ETFs and the advantages they provide.

Market Index ETFs:

• S&P 500 ETFs: These provide wide exposure to the American equity market by tracking the 500 biggest U.S. companies.

• Dow Jones Industrial Average ETFs comprise 30 large, blue-chip companies, ideal for investors seeking exposure to industry leaders.

• Russell 2000 ETFs: If you are seeking to invest in smaller companies that have growth potential, you might want to consider Russell 2000 ETFs. These ETFs focus on small-cap stocks.

Sector and Thematic ETFs:

• Healthcare and Financial Services ETFs: Provide targeted investment in specific sectors without needing individual company analysis.

• Technology and Clean Energy ETFs allow investors to capitalise on specific themes or trends, such as technological advancements or sustainability.

Asset Class and Strategy ETFs:

• Bond ETFs: The Bloomberg U.S. Aggregate Bond Index ETFs reflect the performance of high-quality fixed-income instruments suitable for risk-averse investors.

• Commodity ETFs: Track the prices of commodities, offering a hedge against inflation and portfolio diversification.

• Growth vs. Value ETFs cater to specific investment strategies, allowing investors to align their portfolios with their financial goals and risk tolerance.

This diversified range of ETFs provides investors with numerous options to build a portfolio that aligns with their long-term investment goals, risk tolerance, and preferred sectors or themes.

Key Factors to Consider When Selecting ETFs

You will have to meticulously evaluate several key factors to select the best ETFs for long-term investing. To assist you in choosing from the top 7 long-term ETFs available in the market, consider the following aspects:

Expense Ratio and Performance History:

• Expense Ratio: Look for ETFs with low expense ratios to ensure more of your investment goes towards growing your portfolio rather than paying fees.

• Performance History: While past performance doesn’t indicate future results, consistency over time can indicate an ETF’s management quality. However, remember that past performance does not guarantee future results.

Assets Under Management (AUM) and Liquidity:

• AUM: A higher AUM often indicates a more stable and prosperous ETF, which means it has more resources for portfolio management.

• Liquidity: High trading volume and a tight bid-ask spread make buying and selling shares easier without impacting the price too much. This is crucial for managing your investment efficiently.

Diversification and Sustainability:

• Diversification: To mitigate risk, opt for ETFs that offer broad exposure across different sectors, asset classes, or regions.

• Sustainability: If you value ESG criteria, consider ETFs that focus on sustainability standards. This will align your investment with your values and can contribute to long-term growth potential.

Top ETF Categories for Diversified Portfolios

To ensure a diversified portfolio, focusing on a mix of sector ETFs, international ETFs, and commodity ETFs is paramount. Here’s a breakdown to guide your selection:

Sector ETFs:

• Technology: Vanguard Information Technology ETF (VGT)
• Financials: Financial Select Sector SPDR Fund (XLF)
• Energy: Energy Select Sector SPDR Fund (XLE)
• Healthcare and technology are pivotal sectors for growth. ETFs like VGT and XLF allow you to gain exposure to these industries without needing in-depth company analysis.

International ETFs:

• Developed Markets: Vanguard FTSE Developed Markets ETF (VEA).
• Emerging Markets: Vanguard FTSE Emerging Markets ETF (VWO).
• VEA offers comprehensive coverage of developed-market equities, including small-caps and Canadian stocks, providing broad international exposure.

Commodity ETFs:

• Gold: SPDR Gold Shares (GLD).
• Oil: United States Oil Fund LP (USO).
• Commodities like gold and oil offer a hedge against inflation and can be a strategic part of asset allocation for diversifying beyond stocks and bonds.

Invest in ETFs that track industries, countries, or commodities to build a diverse portfolio that fits your goals and risk tolerance.

Evaluating the Best ETFs for Long-term Growth

You should look at each fund’s expense ratio, risk profile, and benchmark performance when deciding which exchange-traded funds (ETFs) are best for long-term growth. Here are some top picks based on these criteria:

Benchmark Performance and Risk Evaluation:

• SPDR S&P 500 ETF Trust (SPY): Benchmarking against the S&P 500, SPY is a leading choice for exposure to the U.S. large-cap space, reflecting a balanced risk-return profile.

• Comparison: Measure your ETF’s performance against SPY to understand relative growth potential and risk.

Top Picks for Long-Term Growth:

• Low Expense Ratios:

• SPDR Portfolio S&P 500 ETF (SPLG): The expense ratio is 0.02%, and the fund offers a 5-year average annual return of 12.6%.

• Schwab U.S. Dividend ETF (SCHD): The expense ratio is 0.06%, and the 5-year average annual return is 10.6%.

• Diversification:

• iShares MSCI ACWIex-U.S. ETF (ACWX): Provides international exposure with an expense ratio of 0.34%.

Motley Fool’s Top 7 ETF Picks:

• Those looking to invest beyond 2024 should consider a mix of funds, such as the Vanguard 500 ETF (VOO), Invesco QQQ Trust (QQQ), and Vanguard Growth ETF (VUG), according to The Motley Fool.

These selections align to identify the best ETFs from the top 7 long-term options available in the market, considering performance, risk, and cost efficiency.

Strategies for Constructing a Long-Term ETF Portfolio

Constructing a long-term ETF portfolio requires a strategic approach tailored to your financial goals and risk appetite. Here are some strategies to consider:

Allocation and Selection:

• Determine the proper allocation based on your investment objectives, risk tolerance, time horizon, and personal situation.
• Implement your strategy by analysing available funds and selecting ETFs that best meet your allocation targets.
• Monitor and assess your portfolio’s performance regularly, comparing each ETF’s performance to its benchmark index.

Investment Strategies:

• Buy and hold is a simple strategy for beginners that emphasises the importance of staying with investments through market fluctuations.

• Core-Satellite: This strategy combines a solid core of equities and bonds with satellites, focusing on specific market niches for growth opportunities.

• Trend Following: Utilizes trading signals to predict market movements, aiming to outperform the market over time.

Portfolio Structure and Entry:

• Define your investment goals and determine the asset mix that aligns with your risk tolerance, choosing between core-and-satellite or equal-weight portfolio structures.

• Consider an entry strategy that suits your investment style, such as dollar-cost averaging or reaching target allocations.

• Tools like etf.com’s Portfolio Builder can help construct a diversified portfolio of ETFs, optimising for long-term growth.

Conclusion

This comprehensive analysis has given you the knowledge to navigate the complex world of ETFs and choose the best funds for long-term growth. You will be required to choose ETFs carefully to build a strong and growth-oriented portfolio. You can consider expense ratios, performance history, and diversification. These factors help you make investment decisions that align with your financial goals, risk tolerance, and potential wealth accumulation.

ETF investing requires ongoing learning, analysis, and strategic planning to succeed financially. You must stay informed and open to new investment opportunities as the market changes. Are you committed to optimising your long-term investment strategies? In that case, you can opt in to our exclusive newsletter, a resource designed to keep you ahead in the ever-changing investing world. By embracing these strategies and resources, investors can confidently pave their way towards financial security and success in the dynamic market of ETF investments.

FAQs

What is the most promising ETF for growth in 2024?

It’s challenging to predict which specific ETF will experience the most growth in 2024, as this depends on various market conditions and economic factors that can change over time.

Which investment fund should I consider for 2024?

Selecting an investment fund for 2024 would require analysing current market trends, future projections, and individual financial goals. It’s advisable to research and consider a diverse range of funds to find one that aligns with your investment strategy.

What is the top ETF for long-term investment?

The Vanguard S&P 500 ETF (VOO) is strongly recommended for long-term investment. The S&P 500 index, which serves as a benchmark for the largest U.S. stocks, is widely acknowledged and respected. The Vanguard ETF that follows this index provides a straightforward and efficient method for long-term investment.

Which ETF has delivered the highest return over the past decade?

Identifying which ETF has had the best 10-year return requires up-to-date performance data. This information can typically be found through financial news outlets, investment platforms, or by directly consulting the historical performance of various ETFs.