8 Best ETF to Buy and Hold Forever - This is a Millionaire's Portfolio

Summary

In this video, the host reviews eight top ETFs suitable for long-term investment, emphasizing diversification and low expense ratios. They discuss the unique features of each, including the Invesco S&P 500 Equal Weight ETF for broad diversification, the Vanguard Total Stock Market ETF for broad exposure, and the VanX Semiconductor ETF for high-growth potential. The video also highlights the importance of considering dividend-focused and international ETFs for a well-rounded portfolio.

Takeaways

• 📈 The video reviews the top eight ETFs that are considered suitable for long-term investment, potentially 'forever' or until retirement.
• 💡 ETFs are exchange-traded funds that mimic a specific index or investment strategy and can be bought and sold on various exchanges, unlike mutual funds which are limited to specific brokers.
• 🌐 The Invesco S&P 500 Equal Weight ETF (RSP) is highlighted for its equal weighting of over 500 stocks, offering diversification and reduced risk compared to ETFs heavily weighted towards one or two companies.
• 💰 RSP has a low expense ratio of 0.2% and has shown a year-to-date return of 7%, with a 10-year return of over 11%.
• 🌍 The Vanguard Total Stock Market Index Fund (VTI) provides broad exposure to the American market with over 3,500 companies and an extremely low expense ratio of 0.03%.
• 💻 The Schwab US Dividend Equity ETF (SCHD) focuses on high-quality companies with a history of consistent dividend payments, offering a 3.58% dividend yield with a low expense ratio of 0.06%.
• 📊 The Invesco QQQ Trust ETF tracks the NASDAQ 100 Index, heavily weighted towards technology companies, and has shown significant growth with a 37% year-to-date return.
• 📈 The Vanguard S&P 500 ETF (VOO) aims to mirror the performance of the S&P 500 with a low expense ratio of 0.03% and a 10-year return of 12.82%.
• 🌐 The Vanguard Information Technology ETF (VGT) has a 10-year return of nearly 21% with an expense ratio of 0.1%, focusing on the technology sector.
• 🌏 The Vanguard International Dividend Appreciation ETF (VIGI) offers international diversification with a 2.5% dividend yield and an expense ratio of 0.15%.
• 💿 The VanX Semiconductor ETF (SMH) is passively managed and focuses on the semiconductor industry, showing a 10-year return of over 24% with an expense ratio of 0.35%.

Q & A

What does the term 'ETF' stand for and how does it differ from a mutual fund?

ETF stands for Exchange Traded Fund. It is similar to a mutual fund in that it is made up of a collection of companies that mimic a specific index or investment strategy. However, unlike mutual funds, ETFs can be bought and sold on any exchange or brokerage site, while mutual funds are typically restricted to being bought and sold through a specific broker.

What is unique about the Invesco S&P 500 Equal Weight ETF (RSP) compared to other ETFs?

The Invesco S&P 500 Equal Weight ETF (RSP) is unique because it is equally weighted, meaning no single company has a disproportionately large stake in the fund. This is intended to maximize diversification and reduce risk, as opposed to most ETFs which may be heavily weighted towards one or two companies.

What is the expense ratio of the Invesco S&P 500 Equal Weight ETF (RSP) and what does it imply for investors?

The expense ratio of the Invesco S&P 500 Equal Weight ETF (RSP) is 0.2%. This means that for every $10,000 invested, an investor would pay $20 in expenses. This is relatively low and implies lower costs for investors compared to funds with higher expense ratios.

What are the advantages of having a broad market ETF like the Vanguard Total Stock Market Index Fund (VTI) in a portfolio?

The Vanguard Total Stock Market Index Fund (VTI) offers broad exposure to the market by investing in a wide array of sectors and company sizes, including large, mid, and small cap stocks. This helps in diversifying the portfolio, minimizing risk, and providing a representation of the overall market performance.

How does the Schwab US Dividend Equity ETF (SCHD) select the companies it invests in?

The Schwab US Dividend Equity ETF (SCHD) uses a fundamental screen to select companies with a 10-year history of consistently paying dividends. It considers factors such as cash flow to debt ratio, return on equity, dividend yield, and growth rate, focusing on high-quality, large-cap companies.

What is the significance of the dividend yield provided by the Schwab US Dividend Equity ETF (SCHD) and how does it affect an investor's return?

The dividend yield of the Schwab US Dividend Equity ETF (SCHD) is 3.58%. This is significant as it provides a steady income stream for investors. It's important to note that the total return of the fund assumes that dividends are reinvested, which can contribute to an investor's overall return.

Why is the Invesco QQQ Trust ETF different from the other ETFs mentioned in the script?

The Invesco QQQ Trust ETF is different because it tracks the NASDAQ 100 Index, focusing heavily on technology and innovation companies. Unlike the other ETFs which emphasize diversification, QQQ is less diverse but offers high growth potential due to its concentration on high-tech companies.

What is the significance of the expense ratio of the Vanguard S&P 500 ETF (VOO) and how does it benefit investors?

The expense ratio of the Vanguard S&P 500 ETF (VOO) is 0.03%, which is very low. This means that for every $10,000 invested, an investor would only pay $3 in expenses. This low cost is beneficial for investors as it allows more of their investment to grow over time without being eroded by high fees.

How does the Vanguard Information Technology ETF (VGT) ensure that it closely tracks the MSCI US Information Technology Index?

The Vanguard Information Technology ETF (VGT) uses a full replication strategy, holding all the stocks in the index in the same proportions as the index. If full replication is not possible due to regulatory constraints, the fund uses a sampling strategy to approximate the index's key characteristics.

What is the VanX Semiconductor ETF (SMH) and why might it be a good option for investors interested in the growth of the electronics industry?

The VanX Semiconductor ETF (SMH) is an index fund that tracks the Semiconductor Sector Index, investing in companies that produce the building blocks of electronic devices such as CPUs, GPUs, and transistors. It might be a good option for investors because the demand for high-performing electronics is expected to continue growing, which could drive the performance of semiconductor companies.

Why did the script mention the importance of considering a bond ETF for a near-perfect portfolio?

The script mentioned the importance of considering a bond ETF to create a near-perfect portfolio because bonds can provide stability and diversification. They can help balance the risk associated with stocks, especially during market downturns, and can contribute to a more balanced investment strategy.