The Best ETFs to Buy and Hold for the Long Term
The best ETFs feature structural characteristics that make them good buy-and-hold options for a wide variety of investors for the long term.
The exchange-traded fund (ETF) industry is in full bloom now.
According to ETF Central, a platform that tracks ETF markets and issuer data, there were more than 5,500 U.S.-listed ETFs as of July 23. That's explosive growth compared with January 22, 1993, when the first U.S.-listed ETF, the SPDR S&P 500 Trust (SPY), launched and kicked off the modern exchange-traded-fund era.
The expansion has reached a point at which U.S.-listed ETFs now outnumber individual stocks, according to Bloomberg. A great example is Strategy (MSTR), the software maker turned bitcoin treasury company formerly known as MicroStrategy.
If you search for MSTR in most brokerage apps, you'll find dozens of ETFs offering leveraged, inverse or income-oriented exposure to the stock. That level of proliferation speaks to how deeply ETFs have saturated every corner of the market.
It also reflects a broader trend. ETF issuers are increasingly catering to Gen Z's appetite for high-beta and yield-focused strategies, often built with derivatives or concentrated exposures.
Yet it helps to step back and remember why ETFs became popular in the first place. Their core appeal is transparency, liquidity and tax efficiency. Those features are why ETFs are one of the easiest ways to start investing.
Keeping these traits in mind is essential when deciding the best ETFs to include in a long-term portfolio.
How we picked the best ETFs to buy for the long term
There is no clean or perfectly objective way to determine which five ETFs are the "best" out of more than 5,500 options. Focusing on a single metric would create a lopsided and unfair list.
For example, we could simply choose the five largest ETFs by assets under management, but that would reflect factors such as time in the market rather than inherent quality. SPY has had almost three decades to grow, and the largest issuers, including Vanguard, iShares, State Street and Invesco, have enormous marketing budgets that help keep their flagship ETFs in front of investors.
Ranking solely by historical returns has similar problems. ETFs don't share common inception dates, and results are heavily dependent on rolling periods. An ETF that shines in the last decade might look much weaker if the start or end date changes slightly. More important, past returns don't predict future performance, especially when market leadership rotates.
To keep the process fair, we selected one ETF that represents the "best in class" for its category. We chose five broad asset classes that nearly every investor encounters: equities, fixed income, commodities, cryptocurrency and multiasset. The goal was to highlight ETFs with structural traits that make them durable buy-and-hold candidates rather than temporary fads.
From there, we relied on a universal attribute that Morningstar and other research firms have repeatedly identified as the single most reliable predictor of fund returns: fees.
An ETF's expense ratio is deducted from the fund's assets throughout the year. You don't pay it out of pocket, but it reduces your net returns every day. Through long stretches, this drag compounds, which is why low-cost funds consistently outperform more expensive peers with similar strategies.
Asset managers understand that. In the past decade, fee compression has been one of the most important trends in the industry. ETF issuers have either held expenses flat or cut them to remain competitive, benefiting investors and reshaping competition across categories.
For each best-in-class pick, we also emphasized ETFs with robust assets under management for longevity and scale. Finally, we focused on low bid-ask spreads to ensure efficient trading for investors of all sizes.
Ticker |
Exchange-traded fund |
AUM |
Expenses |
VT |
Vanguard Total World Stock Index Fund ETF |
$77.6 billion |
0.06% |
IUSB |
iShares Core Universal USD Bond ETF |
$42.9 billion |
0.06% |
GLDM |
SPDR Gold MiniShares Trust |
$28.3 billion |
0.10% |
FBTC |
Fidelity Wise Origin Bitcoin Fund |
$11.4 billion |
0.25% |
CGBL |
Capital Group Core Balanced ETF |
$7.2 billion |
0.33% |
Vanguard Total World Stock Index Fund ETF
- Type: Large stock blend
- Assets under management: $77.6 billion
- Expenses: 0.06%, or $6 on every $10,000 invested annually
- 30-day median bid-ask spread: 0.01%
The Vanguard Total World Stock Index Fund ETF (VT) offers one of the strongest value propositions in the equity ETF space. For $6 per $10,000 invested, you gain exposure to more than 10,000 stocks that represent the global stock market.
Its benchmark, the FTSE Global All Cap Index, spans U.S. stocks, international developed markets, emerging markets and the full market cap spectrum across all 11 sectors.
VT is the ultimate buy-and-hold ETF for hands-off investors. There's no need to predict which countries, sectors or company sizes will lead. The market-cap-weighted approach keeps turnover low and lets winners rise naturally.
Investors receive maximum diversification in a single position, making VT a highly efficient core equity allocation.
Sponsored Content
iShares Core Universal USD Bond ETF
- Type: Intermediate core-plus bond
- Assets under management: $42.9 billion
- Expenses: 0.06%
- 30-day median bid-ask spread: 0.02%
Many of the most popular bond ETFs track the same Bloomberg Aggregate Bond Index, which holds thousands of U.S. Treasurys, agency mortgage-backed securities and investment-grade corporate bonds. It represents the traditional "buy the market" approach for high-quality fixed income.
The iShares Core Universal USD Bond ETF (IUSB) takes this idea a step further. Its benchmark, the Bloomberg U.S. Universal Index, combines the familiar aggregate exposure with a modest allocation to high-yield corporate bonds.
High-yield bonds are less liquid and harder for individuals to access directly, but they can enhance diversification and increase yield. IUSB blends these exposures at low cost and creates a more complete core bond portfolio.
Sponsored Content
SPDR Gold MiniShares Trust
- Type: Commodities focused
- Assets under management: $28.3 billion
- Expenses: 0.10%
- 30-day median bid-ask spread: 0.01%
The SPDR Gold MiniShares Trust (GLDM) wasn't the first gold ETF, but it set a new standard for low-cost access to physical gold. Investors can bypass the wide dealer spreads associated with buying bullion and trade GLDM in a regular brokerage account, including tax-advantaged accounts such as a Roth IRA.
The trust is physically backed, with gold stored at JPMorgan Chase Bank locations in London, New York and Zurich.
Since its launch, competing products have appeared, but few have matched GLDM's combination of size, liquidity and cost, especially during the recent surge in gold prices.
One notable structural detail is that GLDM is a grantor trust governed by the Securities Act of 1933 rather than the Investment Company Act of 1940, which affects how it holds and stores metal.
Sponsored Content
Fidelity Wise Origin Bitcoin Fund
- Type: Digital assets
- Assets under management: $11.4 billion
- Expenses: 0.25%
- 30-day median bid-ask spread: 0.05%
In January 2024, the Securities and Exchange Commission (SEC) approved the first spot bitcoin ETFs, opening the floodgates for cryptocurrency investing through traditional brokerage accounts.
Spot ETFs hold actual bitcoin rather than futures contracts, which was a major shift. However, most of the new ETFs rely on Coinbase Holdings (COIN) for custody, creating a single point of operational risk.
The Fidelity Wise Origin Bitcoin Fund (FBTC) stands out because it stores its bitcoin directly with Fidelity. Fidelity began building digital asset infrastructure in 2014 and has developed in-house capabilities that few traditional firms possess.
While FBTC is not the cheapest or the most traded, its independent custody model makes it a noteworthy option for serious cryptocurrency investors looking for a trustworthy bitcoin ETF.
Sponsored Content
Capital Group Core Balanced ETF
- Type: Moderate allocation
- Assets under management: $7.2 billion
- Expenses: 0.33%
- Bid-ask spread: 0.03%
Balanced portfolios were once dominated by mutual funds built around the classic 60/40 mix of stocks and bonds. These funds often generated annual capital-gains distributions, creating tax inefficiencies.
In ETF form, balanced strategies avoid many of these issues, and the Capital Group Core Balanced ETF (CGBL) has quickly become a standout for this category.
CGBL is actively managed and holds a mix of Capital Group fixed-income ETFs and direct stock positions. It typically keeps between 50% and 75% of assets in equities, with the remainder in bonds.
It also uses Capital Group's long-standing system in which multiple managers run separate sleeves of the same portfolio, bringing their own research and best ideas.
Sponsored Content
Why buy ETFs?
Compared with other fund types such as mutual funds and closed-end funds (CEFs), ETFs have grown far faster and have taken in steady inflows for years.
A big reason is structural. ETFs solved several problems that plagued both mutual funds and CEFs, and they did it through the in-kind creation and redemption process.
Mutual funds are open-ended, which means the fund company creates or cancels shares based on investor demand. The challenge is capital gains distributions. In a high-turnover mutual fund, or one that realizes gains and losses throughout the year, investors can receive a capital gains tax bill even if they never sold their own shares.
The buying and selling activity of other investors, along with portfolio rebalancing by the manager, forces the fund to realize gains that get passed through to every shareholder. This is why many mutual fund investors get hit with taxable distributions at the end of December despite doing nothing.
ETFs avoid this issue because the fund manager doesn’t create new shares. Instead, authorized participants work directly with the ETF issuer to create or redeem shares using a basket of the underlying securities. Creation and redemption in kind keeps the buying and selling activity outside the fund, preventing the realization of taxable gains within the ETF itself.
CEFs have a different issue. They’re publicly traded funds, but they have a fixed pool of shares. As a result, the market price can trade above or below the value of the underlying holdings. A price above the net asset value is a premium, and a price below is a discount.
For investors, the entry point isn’t always intuitive. A good CEF can trade at a steep premium, while a struggling CEF can trade at a discount for years. ETFs solved this by allowing arbitrage between the market price and the net asset value.
If the ETF trades above its underlying value, an authorized participant can deliver the underlying basket, receive ETF shares and sell them for a quick profit. If the ETF trades below its underlying value, the process reverses. These arbitrage incentives keep ETF prices close to their net asset values and prevent persistent premiums or discounts.
There are also practical benefits. ETFs offer greater liquidity and usually trade with much narrower bid-ask spreads than CEFs. Unlike mutual funds, which are priced once after the market closes, exchange-traded funds trade throughout the day like stocks. Most ETFs also disclose their full portfolios daily, while mutual funds typically report only a handful of times per year.
Given the number of ETFs now available across every asset class, geography and strategy, it’s easy for investors to get lost in the sheer variety. It helps to step back and remember the mechanics that made ETFs popular in the first place and to use those traits as a foundation when deciding which ones are worth owning.
Related content
Sponsored Content
