9 ETFs to Own Forever
Here are ETFs with staying power.
Investing icon Warren Buffett has led Berkshire Hathaway (ticker: BRK.A, BRK.B) to success for decades. And beyond his profitable moves, Buffett also shares a litany of quotes that have proven to be great advice for investors. One is particularly noteworthy for this period of market uncertainty. It is about picking the right investments for the long haul. As Buffett put it when asked how long he thinks about holding an investment, he replied, "Our favorite holding period is forever." It may sound crazy to invest and never think about selling, but if Buffett can do it, why can't you? So where should you park your cash if you're looking to buy and hold an exchange traded fund forever? Here are nine different ETFs worth a look.
SPDR S&P 500 ETF Trust (SPY)
One of the very first ETFs on Wall Street, SPY has tracked the S&P 500 index of the largest U.S. companies since 1993 and has gathered a staggering $280 billion or so in total assets. That puts SPY it in a class by itself, and proves it has staying power for a very long time. If you're looking to play big names like Microsoft Corp. (MSFT) and Johnson & Johnson (JNJ), this is the gold standard built to withstand the test of time. And with a gross expense ratio of just 0.0945% annually, fees that total less than $10 a year on every $10,000 invested mean you're still getting a very cost-effective ETF even if it's not the absolute cheapest option.
Strategy: Large U.S. stocks
Vanguard Russell 2000 ETF (VTWO)
Large U.S. stocks are important to hold, but when you think about "forever" stocks it's important to remember that even entrenched giants can run into trouble eventually. That makes this Vanguard fund, which plays smaller companies, also important. Benchmarked to the Russell 2000 index, this $2 billion fund excludes the top 1,000 American companies and then builds its portfolio with the next 2,000 stocks in line. You're more likely to get smaller stocks with a bit more innovative potential than the mature names in the S&P 500. This comes with a bit more risk, sure, but this Vanguard fund is diversified across those 2,000 names. Furthermore, if you're investing for the long haul then you can afford to be patient.
Strategy: Small U.S. stocks
iShares Core S&P Mid-Cap ETF (IJH)
There is a middle ground between large and small companies via this iShares fund that plays "Goldilocks" stocks. These are neither so big they are sleepy megacaps nor are components so small that they are prone to excessive volatility or big declines in profits after just one misstep. These names include trucking stock Old Dominion Freight Line (ODFL) and apartment operator Camden Property Trust (CPT). Interestingly, IJH may have a mid-sized strategy but it has a massive footprint with about $50 billion under management at present. This shows the popularity of investing in middle market companies and why it should be part of many portfolios for the long haul.
Strategy: Mid-sized U.S. stocks
Vanguard FTSE Emerging Markets ETF (VWO)
Speaking of specialized funds that have a massive following, this Vanguard emerging markets offering commands about $87 billion under management to rank as one of the largest ETFs of any kind on Wall Street. While the components include Chinese tech giant Tencent Holdings Ltd. (TCHEY) and Brazilian energy giant Petrobras (PBR), this ETF also holds more than 4,700 total companies, including a bunch of smaller and more obscure names you would have trouble accessing on your own. This makes for quite a lineup of international stocks -- and as is typical with Vanguard, it all comes at a rock-bottom cost structure. Expenses are just 0.12% or $12 annually on every $10,000 invested.
Strategy: Emerging market stocks
iShares MSCI ACWI ex-U.S. ETF (ACWX)
Don't get confused by all the letters. Because if you're looking for global exposure to developed markets instead of emerging markets, then this iShares fund spells "success." The rather arcane name boils down simply to this: The fund is benchmarked to an MSCI All-Country World Index, but excludes any stocks located in the United States. That means it's perfect for investors looking to steer clear of emerging markets like China and Brazil and instead focus on more developed markets like Japan and Europe for long term returns. It's also useful as a complimentary holding that won't duplicate the typical large cap stocks you may hold otherwise.
Strategy: Developed markets excluding U.S.
Vanguard Total World Stock ETF (VT)
Don't want to overthink things? Then check out this Vanguard fund with more than 8,200 holdings of all shapes, sizes, sectors and geographies. About 60% of the fund is in the U.S., but as the largest national economy in the world as measured by GDP then that's probably as it should be. Other developed markets including Japan, the United Kingdom, France, Canada and Germany are also well-represented. If you really are a long term investor just looking to play the global economy over many years, then you could do worse than to park your cash in this single investment. It's a diversified one stop shop for equity investments that takes the guesswork out of a buy and hold portfolio.
Strategy: Total stock market
iShares iBoxx Investment Grade Corporate Bond Fund (LQD)
Though most investors probably think of stocks first when they look at ETFs, this iShares bond fund is incredibly popular and makes the list of the top exchange traded products on Wall Street as measured by assets. Specifically, LQD boasts more than $36 billion under management at present. The fund holds more than 1,000 different investment grade bonds, meaning no risky loans to companies that are more likely to run into trouble or default on their debts. Think firms like Apple (AAPL) and Citigroup (C). With companies like these, this fund is a perfect fit for a "forever" portfolio.
Strategy: Corporate bonds
iShares Core U.S. Aggregate Bond ETF (AGG)
Even bigger is AGG, a more diversified bond fund from iShares that offers broad exposure to fixed income markets via investment-grade bonds like those in the aforementioned LQD fund, but also U.S. Treasury bonds that don't yield much but are super stable and a smattering of "junk" bonds that offer higher yield but a bit more risk. A total of $65 billion in assets under management and a massive portfolio of about 7,700 different bonds ensures that you will be invested in a comprehensive and diversified bond fund for the long haul. That makes AGG a fund you truly can hold forever, particularly if you're focused on long term income.
Strategy: Diversified bonds
SPDR Gold Shares (GLD)
For long term investors looking for a truly diversified portfolio, GLD should have a place. That's because this ETF holds gold bullion, an uncorrelated asset that is a great way to ensure you smooth out some of the inevitable bumps in the road when you're investing your cash with a long time horizon. Gold by itself can be a tricky investment, but as a hedge against market declines or inflation, it has a very useful purpose for investors. And with some $43 billion in assets under management, anyone who buys in will have plenty of company in GLD.
Strategy: Gold
ETFs to own forever:
-- SPDR S&P 500 ETF Trust (SPY)
-- Vanguard Russell 2000 ETF (VTWO)
-- iShares Core S&P Mid-Cap ETF (IJH)
-- Vanguard FTSE Emerging Markets ETF (VWO)
-- iShares MSCI ACWI ex-U.S. ETF (ACWX)
-- Vanguard Total World Stock ETF (VT)
-- iShares iBoxx Investment Grade Corporate Bond Fund (LQD)
-- iShares Core U.S. Aggregate Bond ETF (AGG)
-- SPDR Gold Shares (GLD)
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