The Best ETF to Buy and Hold for the Next Decade
Investors should have a long-term investing outlook. It’s a smart approach, given stocks’ unpredictable short-term volatility. Buying exchange-traded funds (ETFs) allows investors to own a diversified portfolio with a vehicle that trades like a stock. That means you can readily sell it and get cash.
There’s a daunting number of ETFs to choose from these days. Which one is the best to buy and hold for the next decade? Here’s why the Vanguard Total World Stock ETF (VT -0.18%) ranks as my top ETF to buy and hold.
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What you’re buying
The Vanguard Total World Stock ETF invests in both U.S. and non-U.S. stocks. That provides good geographic diversity rather than relying on a specific region to perform well. North America, at about 65%, represented the largest region as of June 30. Europe, the Pacific, and emerging markets followed, with 13.7%, 11.1%, and 10% weightings, respectively.
The ETF has over 10,000 equity holdings, providing lower exposure to individual stocks than other ETFs. The Vanguard ETF’s top 10 holdings include familiar names like Nvidia, Apple, and Meta Platforms, but their weights range from 1.1% to 4%. The top 10 holdings combined have a 20.4% weight. By contrast, the top 10 holdings of an index fund tracking the S&P 500, like the SPDR S&P 500 ETF Trust, range from 1.5% to 8% weightings. These add up to over a 38% weight.
The Vanguard Total World Stock ETF tracks the FTSE Global All Cap index, a mix of developed and developing countries’ equities. Since it’s a passive ETF, it has a low expense ratio of 0.06%. That’s important since, all else being equal, the lower the expenses, the higher an investor’s return.
Vanguard International Equity Index Funds – Vanguard Total World Stock ETF
Today’s Change
(-0.18%) $-0.30
Current Price
$162.09
Key Data Points
AUM
$97B
Dividend Yield
1.53%
Expense Ratio
0.06%
Top Holdings
NVDA
4.00%
AAPL
3.59%
MSFT
2.38%
Why it’s a long-term holding
U.S. large-cap stocks have had quite a run. Over the past decade through June 30, the S&P 500 returned nearly 323%. But relying on that continued performance is a risky bet. A global approach seems like a better way since it offers greater diversity. The Vanguard Total World Stock ETF, which holds companies in both developed and developing nations, allows investors to diversify more.
Turning to costs, the ETF has a low expense ratio due to its passive approach. Given the challenges active funds have in beating their benchmarks, a low-cost, passive ETF is a smart way to go. That’s because you’re not paying an active ETF manager higher fees to try to outperform an index, which has been proven very difficult to do over long periods.
A global ETF with low costs makes this my top ETF pick to buy and hold for at least the next decade.
