When it comes to long-term investing aimed at growing your account balances over time, there is no reason to overcomplicate things with expensive sector bets or speculative SPAC positions. While the final decision as to how to deploy your money is ultimately up to you, it's best to consider funds that tilt the odds in your favor of success in the long run. These funds share common characteristics: They're low-cost, broadly diversified, actively traded, require little or no maintenance, and they tend to be easy to understand. In this article, we'll look at five exchange traded funds (ETFs) poised to grow your retirement account.
1. Vanguard Total World Stock ETF
The Vanguard Total World Stock ETF (VT 0.19%) offers global exposure to the world's top companies. If you wanted to hold this fund -- and this fund only -- from your early 20s until retirement, there would be a good case for doing so. It's quite inexpensive with an expense ratio of 0.08%, provides exposure to a weighted average of the world's economy, and requires no manual maintenance or rebalancing whatsoever.
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It would be difficult to find a fund with better ease of use, although one downside here is that you don't have control over the underlying portfolio. You'll basically be given a 60% North American/40% international basket of stocks that you can confidently hold for the long term. If you're nearing retirement, you'll want to supplement this fund with a bond fund to dampen any short-term volatility.
2. Vanguard FTSE All-World ex-US ETF
If you want more control over your international holdings (say, if you believe 40% is too much) you might consider the Vanguard FTSE All-World ex-US ETF (VEU 0.19%). The fund has a 0.08% expense ratio and trades in a highly liquid market, but only invests in companies outside of the United States. If you hold an S&P 500 fund in your IRA or in another investment account, you might want to look at this fund as a potential pairing option. This fund can also make sense if you only want 20% or 30% exposure to international companies as opposed to the prescribed 40% found in the Total World Stock ETF.
3. Vanguard ESG U.S. Stock ETF
For those concerned about climate change, natural resources, and corporate governance (hint: you should be), the Vanguard ESG ETF (ESGV 0.25%) is one lower-fee option for broad investment in environmentally conscious businesses. A significant share of younger investors value the message behind its investments, and many strive to invest only in companies that align with their deeply held beliefs about the world and its way forward.
Many of this fund's top holdings are similar to that of a standard S&P 500 index fund. However, the fund leaves out companies that harm the environment (oil and coal) or are in so-called "sin stock" industries (tobacco, alcohol, and gambling).
4. Schwab Emerging Markets ETF
The outlook for emerging market growth in the 2020s is generally quite positive, and the Schwab Emerging Markets ETF (SCHE 0.09%) is one of the most tax-efficient ways to access this segment. This ETF invests primarily in China, Taiwan, India, and Brazil, and aims to capitalize on what appears to be a promising decade for burgeoning economies. It's recommended to use this ETF as one part of a broader portfolio that already has positions in the U.S. and in developed foreign economies. Still, you'll enjoy minimal fees and passive management much the same as with most ETFs at Schwab.
5. A Bitcoin ETF -- whenever one becomes available
We've witnessed Bitcoin (BTC 0.99%) take off to nearly $50,000 in a matter of weeks. There's therefore an argument to be made that holding Bitcoin in a retirement portfolio is simply insurance against a future of entirely digitized money.
So far, no Bitcoin ETFs are available in the U.S., with regulators citing the cryptocurrency's volatility as prohibitive for everyday investors. However, it's not difficult to imagine a not-too-distant future in which Bitcoin is a very significant part of how the world operates, and on that basis, a 1% allocation could be advisable. A Bitcoin ETF would provide seamless, lower-fee access to the cryptocurrency on the major brokerages.
Fewer is better
The advantages to minimalist investing are many. It's much easier to select a few funds with a high chance of delivering long-term performance than to have dozens of funds scattered across accounts and brokerage platforms. Investing is also an exercise in "leaving well enough alone" and having the discipline to stick to your long-term plan. You don't need to hold all funds at Vanguard, but you should hold funds that are low-fee, broadly diversified, and require little maintenance. If you commit to these ideas, you'll stand the best chance of achieving a relaxing retirement.
