by Lawrence Meyers | October 23, 2013 6:00 am
Every now and then, it’s good to do a reality check and take a hard look at your portfolio. Is there something missing from the long-term portion of it that you need to fill in?
If you do find yourself lacking some surefire, forever holdings, consider simply picking the best ETFs in the best long-term sectors.
See, there are some sectors that I want to hold forever because I consider them to be intrinsic to our lives as human being on planet Earth. It may sound exaggerated, but there really are some products that it’s nearly impossible to imagine life without. If they were to vanish, people would be at a loss.
The companies that cater to such products are thus great buy-and-hold investments. But rather than choosing individual stocks in a sector, it’s smart to take a more conservative approach and buy the best ETFs. They provide diversification in the event one chosen company blows up.
Take a look at the three best ETFs to own until you die:
Energy holdings of some kind are a must, as energy is a massive, massive industry with a foothold in every developed nation … and in many emerging ones as well. Heck, the world has wars over oil, the technology used to extract and refine it continues to evolve, and it remains absolutely essential to everyday life.
That’s why a good buy-and-hold stock would be an energy stock like BP (BP). Of course, you sure didn’t want to be a BP shareholder during the Deepwater Horizon debacle … which is why an energy ETF is an even smarter way to play the space.
The best energy ETF is the Energy SPDR (XLE). It holds all the important names, with top holding ExxonMobil (XOM) taking up 15% of the fund, followed by Chevron (CVX) and Schlumberger (SLB), which just posted killer earnings.
Plus, this energy ETF pays a solid dividend just under 2%, is highly liquid and can be yours for a mere 0.18% in expenses. That makes the XLE a critical component of any long-term portfolio.
Next up, we have an ETF that encompasses some of the most famous names in the world. And those names — and the stocks associated with them — are famous because their founders figured out decades ago that certain products must always be purchased by human beings, particularly in developed nations.
That’s why those products are called “staples.”
The best ETF for must-have consumer products is pretty obvious as well: The Consumer Staples SPDR (XLP). The XLP includes a wide range of companies, which provide everything you could possibly need.
There are basic healthcare and hygiene products from Procter & Gamble (PG), beverages that are cheap from Coca-Cola (KO), tobacco from Philip Morris International (PM) and the catch-all store that is Walmart (WMT).
Investors even get a 2.5% yield out of it, all for that reasonable expense ratio of 0.18%.
Lastly, we have the Financial SPDR (XLF), which may surprise some people since many think that we are going to suffer at least one more financial crisis in the future.
I disagree — I guarantee we’ll have even more than one.
But still, financial services are completely wrapped around everything we do. That’s because consumption is what we do best … and you can’t consume unless you purchase, and you can’t purchase unless you have at least one financial service company involved.
And those services I’m referring to go way beyond banking, by the way. There’s so much infrastructure associated with financial services, it would make your head spin.
The good news is that all aspects of the financial world are wrapped up nicely in the XLF, with Warren Buffett’s Berkshire Hathaway (BRK.B) stealing the title of the fund’s largest holding. And again, this SPDR comes with rock-bottom expense ratio of 0.18%.
The XLF may have some volatility here and there, but over the long term it remains one of the best ETFs you can buy, and an obvious core holding for any portfolio.
As of this writing, Lawrence Meyers owned shares of XLE, XLF and XLP.
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