A millionaire’s retirement doesn’t happen by chance. It takes years of patience, discipline and consistent returns on investment. Because of their simplicity, exchange-traded funds can be a great fit for any long-term investor.
Exchange-traded funds, or ETFs, are groups of individual stocks that trade under a single symbol. It’s an easy way for investors to diversify their portfolios, as a few ETFs can expose you to hundreds of companies.
It is always important to invest according to your personality and risk tolerance. So here are three very different ETFs that can help you build wealth over decades and potentially reach that million dollar mark by the time you retire.
1. Vanguard S&P 500 ETF
Consider starting with the basics. This would tell you the Vanguard S&P 500 ETF (NYSEMKT:VOO)one of only two ETFs from the Warren Buffett company, Berkshire Hathaway, holds in its multi-billion dollar stock portfolio. The idea of this fund is simple. THE S&P500 is an index of 500 of the largest American companies. Think about the well-known names that everyone, even non-investors, knows. The index weights them based on their market capitalization so that the index, which has historically proven to be remarkably effective at creating wealth, displays an average annual return of around 10% over the long term.
The Vanguard S&P 500 ETF’s top 10 holdings include:
Microsoft: 7.08%
Apple: 5.63%
Nvidia: 5.05%
Amazon: 3.73%
Metaplatforms: 2.42%
Alphabetical class A: 2.01%
Berkshire Hathaway Class B: 1.73%
Alphabetical class C: 1.70%
Eli Lilly & Co.: 1.40%
Broadcom: 1.32%
You should include this fund in your portfolio because the S&P 500 ultimately represents the best companies in the world’s best economy. It has always recovered from wars, recessions and other crises to reach new heights. You don’t have to make things too complicated. Simply buy and hold this replacement for the broader stock market.
2. Grayscale Bitcoin Trusted ETFs
Truly diversifying your investments means getting out of the world of individual companies and looking at new assets as a whole. Take into account Grayscale Bitcoin Trust ETF (NYSEMKT:GBTC). This is the leading ETF focused on Bitcoin.
The Grayscale Bitcoin Trust ETF offers the best of both worlds. Investors can benefit from Bitcoin’s price action by owning shares, which have far outperformed the broader stock market over the past decade. Why would you own the fund instead of just buying Bitcoin? Well, owning shares of the fund is managed like owning any other stock. You can put it in your stock portfolio and the stock is monitored by the Securities and Exchange Commission (SEC).
Meanwhile, owning Bitcoin yourself could mean having to store the tokens, which could backfire if you forget your password, which has infamously kept some early Bitcoin investors out of their millions of dollars in crypto. The Grayscale Bitcoin Trust ETF is the easy button to invest in Bitcoin, and there is nothing wrong with going this route.
3. iShares 20+ Year Treasury Bond ETF
Let’s stay on the theme of new asset classes. Sometimes investors want passive income and don’t necessarily want to maximize returns based on prices. THE iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) might be for you. This is a fund of U.S. Treasury bonds, all at least 20 years remaining until maturity.
The fund has returned on average nearly 4% over the past 12 months and 4.75% over the past 30 days. Its beta of 0.6 implies that the fund is less volatile than the stock market as a whole. In other words, the iShares 20+ Year Treasury Bond ETF is a glacier where investors can store money and expect safe passive income compared to stocks.
Investors in their 20s can probably avoid this fund due to its conservative nature; they have the time horizon to focus entirely on maximizing growth. However, it would be best to consider adding Treasury bonds to your portfolio as you get older and your margin for investment error decreases. Treasuries are a great place to find low-risk income; this fund makes it easier for you.
Should you invest $1,000 in the Vanguard S&P 500 ETF right now?
Before buying shares of the Vanguard S&P 500 ETF, consider this:
THE Motley Fool Stock Advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now…and the Vanguard S&P 500 ETF was not one of them. The 10 stocks selected could produce monster returns in the years to come.
Consider when Nvidia made this list on April 15, 2005…if you had invested $1,000 at the time of our recommendation, you would have $525,806!*
Equity Advisor provides investors with an easy-to-follow plan for success, including portfolio building advice, regular analyst updates, and two new stock picks each month. THE Equity Advisor the service has more than quadrupled the return of the S&P 500 since 2002*.
See the 10 values »
*Stock Advisor returns to April 30, 2024
Suzanne Frey, an executive at Alphabet, is a member of the board of directors of The Motley Fool. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Justin Pope has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Bitcoin, Meta Platforms, Microsoft, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Want $1 million in retirement? 3 ETFs to Buy Now and Hold for Decades. was originally published by The Motley Fool
yahoo
