10 Best ETFs To Buy for Long-Term Growth
If you’re a long-term investor looking to diversify your growth portfolio, there are a number of exchange-traded funds that can help you reach your goals. Exchange-traded funds, or ETFs, are like mutual funds, in that they typically hold multiple securities, but they trade on an exchange like a stock. This makes them very easy to buy and sell, and they generally have low internal expenses as well.
With a single purchase, you can track any number of different sectors or market indices, from international small-cap dividend stocks to the entire U.S. stock market. While there are literally thousands of ETF options, here are 10 that do a great job of covering popular areas of the stock market.
Vanguard Total Stock Market ETF (VTI)
- Price as of Oct. 5: $223.80
The Vanguard Total Stock Market ETF is one of the most popular and well-known growth ETFs available. The ETF tracks the CRSP U.S. Total Market index, owning over 3,900 stocks spanning large-, mid- and small-cap categories. Top holdings currently include such well-known names as Apple, Microsoft, Amazon, Alphabet and Facebook. With assets of $1.3 trillion, the ETF is able to keep expenses extremely low, at just 0.03% of assets annually. Over the last 10 years, the ETF has delivered average returns of 16.61% annually.
iShares Core S&P 500 ETF (IVV)
- Price as of Oct. 5: $434.80
The iShares Core S&P 500 ETF is another popular market-tracking ETF, with net assets of $289.366 billion. Although this S&P 500 tracker is the littler brother to the SPDR S&P 500 ETF Trust and its $386.7 billion, the iShares version has a much lower expense ratio, at 0.03% vs. 0.0945%. The ETF attempts to replicate the return of the S&P 500 index, which is often used as a representation of the stock market as a whole. However, the S&P 500 is exclusively a large-cap index, meaning you’ll need to supplement this ETF with additional investments if you want broader exposure to the entire market.
Invesco QQQ Trust (QQQ)
- Price as of Oct. 5: $357.38
The Invesco QQQ Trust tracks the Nasdaq-100 index, which includes 100 of the largest nonfinancial companies, both domestic and international, that trade on the Nasdaq composite. There is some overlap between these large-cap companies and those listed on the S&P 500 index, including Apple, Microsoft, Alphabet and Amazon. However, the Nasdaq-100 index and, by corollary, the QQQ ETF are more tech-oriented than the S&P 500 index, with about two-thirds of the fund devoted to information technology and communication services.
The QQQ Trust was rated the No. 1 best-performing large-cap growth fund over the past 15 years by Lipper, based on the total return through Dec. 31, 2020.
Vanguard Real Estate ETF (VNQ)
- Price as of Oct. 5: $102.53
The Vanguard Real Estate ETF is not what one would call a “core” holding, but it can be a great diversifier for a portfolio dedicated entirely to growth stocks. Real estate is commonly viewed as a hedge against inflation, and real estate ETFs can also add some income to a growth portfolio. The Vanguard Real Estate ETF currently pays an unadjusted effective yield of 2.41% as of Aug. 31 and has returned 11.53% annually over the past 10 years. The ETF is designed to track the return of the MSCI US Investable Market Real Estate 25/50 Index and owns names such as American Tower, Public Storage and Crown Castle International.
Vanguard Extended Market ETF (VXF)
- Price as of Oct. 5: $183.10
The Vanguard Extended Market ETF tracks a benchmark index of small- and mid-size companies. This index, the S&P Completion Index, is so named because it invests in all of the publicly traded stocks that aren’t a part of the S&P 500 index. The fund’s $114.7 billion in assets is spread among roughly 3,500 stocks, including such well-known smaller names as Square, Zoom, DocuSign, Uber and Snap. Over the past 10 years, the ETF has returned 16.39% per year, on average.
The Technology Select Sector SPDR Fund (XLK)
- Price as of Oct. 5: $150.17
If you’re looking for a little more punch in your growth stock portfolio, take a look at the Technology Select Sector SPDR Fund. Unlike some of the other ETFs on this list, this ETF is dedicated to a specific sector of the market rather than tracking a broad market index. As a more narrowly focused ETF, this fund can be more volatile than the broader index funds, but it may also offer the potential for greater returns.
Over the past 10 years, the performance of the Technology Select Sector SPDR Fund has been nothing short of spectacular, posting an average annual gain of 22.73%. However, investors should note that the fund is top-heavy, with just two stocks, Apple and Microsoft, now comprising over 40% of the ETF’s entire portfolio.
iShares MSCI EAFE ETF (EFA)
- Price as of Oct. 5: $77.91
For a little more diversification to your growth portfolio, consider an international ETF. The iShares MSCI EAFE ETF owns large- and mid-cap stocks from developed nations spanning Europe, Australia, Asia and the Far East. Since it can be hard for American investors to get enough information to make qualified judgments on individual foreign stocks, owning an ETF can be a great way to get some international exposure without having to make blind guesses about specific companies.
The iShares MSCI EAFE ETF also owns many names that are familiar to Americans, from Nestle and Toyota to Sony and LVMH, which is the world’s largest luxury goods conglomerate and the parent company of Louis Vuitton, Givenchy, Dior and Tiffany.
iShares Core MSCI Emerging Markets ETF (IEMG)
- Price as of Oct. 5: $61.32
The iShares Core MSCI Emerging Markets ETF is a great way to get exposure to regions of the world that would be difficult, if not impossible, to invest in as an individual. Emerging markets can be high-risk but also offer the potential for outsized returns. Owning these volatile types of investments in an ETF is a way to gain some protection through diversification as well.
The iShares Core MSCI Emerging Markets ETF invests in large-, mid- and small-cap stocks in emerging countries, and it has posted five-year average annual returns of 9.16%. Although the ETF invests in more speculative countries such as Indonesia, Brazil and Saudi Arabia, almost half of the ETF’s assets are invested in China and Taiwan. The expense ratio on this fund is just 0.11%, which is very thrifty for a fund of this nature.
SPDR Portfolio S&P 500 High Dividend ETF (SPYD)
- Price as of Oct. 5: $39.96
Growth investors with more of a conservative tilt might want to hang on to shares of the SPDR Portfolio S&P 500 High Dividend ETF for the long haul. As the name implies, this ETF invests in high-quality companies paying outsized dividends. Specifically, the ETF is designed to replicate the performance of the top 80 high dividend-yielding companies in the S&P 500, such as Baker Hughes, Pfizer and Comerica. The current dividend yield of the ETF is 3.92%.
iShares Russell 2000 Growth ETF (IWO)
- Price as of Oct. 5: $294.29
The iShares Russell 2000 Growth ETF tracks a select group of stocks in the Russell 2000 index, which includes the 2,000 smallest publicly traded companies in the Russell 3000 index. Fund managers screen Russell 2000 stocks for those most likely to grow at a faster rate than the overall market. As of Oct. 5, the ETF has 1,231 holdings. The diversity among small-cap holdings and the selection process can offset some of the risk of small-cap investing, as evidenced by IWO’s 27% gain over last year.
Daria Uhlig contributed to the reporting for this article.
Data is accurate as of Oct. 5, 2021, and subject to change.