Anyone can invest successfully. All it takes is some money, a little know-how, and time.
With that in mind, let's examine three simple exchange-traded funds (ETFs) that are worth holding for the long term.
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Vanguard Growth ETF
At the top of my list is the Vanguard Growth ETF (VUG -1.43%).
VUG Total Return Level data by YCharts
What's great about this index-linked ETF is that it tracks many of the biggest and best stocks at a reasonable price. The fund is linked to an index that mirrors about 400 growth stocks, ranging from megacap giants like Microsoft and Nvidia to smaller names like Equinix and Synopsys.
| Symbol | Company Name | % of Holdings |
|---|---|---|
| AAPL | Apple | 12.06% |
| MSFT | Microsoft | 11.42% |
| NVDA | Nvidia | 10.00% |
| GOOG/GOOGL | Alphabet | 6.00% |
| AMZN | Amazon | 5.99% |
| META | Meta Platforms | 4.73% |
| LLY | Eli Lilly | 2.87% |
| TSLA | Tesla | 2.70% |
| V | Visa | 1.70% |
Source: Vanguard fund filings
When it comes to fees, this fund gives cost-conscious investors plenty to smile about. The fund boasts a tiny 0.04% expense ratio, meaning investors pay only $4 a year for every $10,000 invested in the fund.
As for risks and downsides, the fund has a few.
First, this fund isn't a great choice for income-seeking investors. With a dividend yield of only 0.5%, the fund simply doesn't generate enough cash for investors who need passive income.
Second, since the fund is focused on growth stocks, the fund will experience greater declines during periods of volatility compared to most value-oriented funds.
That said, the Vanguard Growth ETF remains a solid choice for growth-seeking investors with a medium to long-term time horizon.
Vanguard Value ETF
Next up is the Vanguard Value ETF (VTV -0.59%).
VTV Total Return Level data by YCharts
For those investors looking for a value fund, this is one I would recommend. Like its growth-oriented cousin, this fund tracks an index of 400 stocks -- but with a focus on value. Therefore, top holdings aren't Microsoft and Nvidia, but rather Berkshire Hathaway and ExxonMobil.
| Symbol | Company Name | % of Holdings |
|---|---|---|
| BRK.B | Berkshire Hathaway | 3.17% |
| JPM | JPMorgan Chase | 2.74% |
| UNH | UnitedHealth Group | 2.46% |
| XOM | ExxonMobil | 2.38% |
| PG | Procter & Gamble | 1.86% |
| HD | Home Depot | 1.84% |
| AVGO | Broadcom | 1.83% |
| JNJ | Johnson & Johnson | 1.78% |
| WMT | Walmart | 1.63% |
| ABBV | AbbVie | 1.59% |
Source: Vanguard fund filings
As such, the fund also generates much more income for investors. It has a dividend yield of 2.3%, meaning a $10,000 investment should generate about $230 in annual dividend income.
As for costs, the fund's expense ratio of 0.04% is about as low as expense ratios go for ETFs. That means investors keep more of their money hard at work in the stock market -- which is a good thing.
Finally, turning to risks and downsides, the fund's focus on value does present a risk of underperformance. During the past 10 years, the Vanguard Growth ETF has outperformed the Vanguard Value ETF by more than 150%, which includes a significant advantage for the value fund from dividends paid.
In short, investors with many decades left until retirement may be better served to increase their risk levels, so that they don't underperform the market. However, for investors looking for passive income or those who want to take on less risk, the Vanguard Value ETF could be the right choice.
Vanguard Total Stock Market ETF
Finally, there's the Vanguard Total Stock Market ETF (VTI -1.08%).
What's special about this fund is that it occupies a space between the growth and value funds noted earlier. As an index-tracking fund that seeks to provide a broad exposure to the U.S. stock market, this fund has a little bit of everything.
| Symbol | Company Name | % of Holdings |
|---|---|---|
| AAPL | Apple | 6.07% |
| MSFT | Microsoft | 5.77% |
| NVDA | Nvidia | 5.12% |
| GOOG/GOOGL | Alphabet | 3.18% |
| AMZN | Amazon | 3.17% |
| META | Meta Platforms | 2.25% |
| BRK.B | Berkshire Hathaway | 1.47% |
| AVGO | Broadcom | 1.45% |
| LLY | Eli Lilly | 1.37% |
| TSLA | Tesla | 1.28% |
Source: Vanguard fund filings
Similarly, its 10-year performance fits right in between the growth and value funds. It has generated a 10-year compound annual growth rate (CAGR) of 13.5%. That compares to 16.4% for the Vanguard Growth ETF and 11.5% for the Vanguard Value ETF.
VUG Total Return Level data by YCharts
Turning to fees, the fund is even cheaper than the growth and value funds. Its expense ratio of 0.03% means investors only pay $3 a year for every $10,000 invested in the fund.
As for passive income, the fund has a dividend yield of 1.3% -- not great, but not terrible and roughly in line with the S&P 500 average.
Finally, regarding risks and downsides, the fund lacks any major risks, since it is so diversified. In truth, its main downside is that it has such a broad exposure to the market that it could be considered over-diversified.
Nevertheless, the fund will still decrease in value when the stock market falls, or enters a bear market. However, one shouldn't forget that's normal, and, over time, the stock market has always recovered and made new highs after every bear market.
Therefore, for investors looking for a diversified, cheap, and middle-of-the-road fund, the Vanguard Total Stock Market ETF could be a wise choice.
