In the wake of the global financial crisis, it was often said that buy-and-hold investing was dead. Add to that, critics of the exchange-traded fund industry have often said ETFs would turn investors in a nation of day traders thanks to their intraday liquidity — a feature not offered by mutual funds.
Those assertions have largely proven false.
ETFs have been validated as ways for long-term investors to gain cost-effective exposure to myriad assets — stocks, bonds, even commodities.
Every year, the ETF industry continues to shatter its own asset records. In the first quarter of this year, U.S.-listed exchange-traded funds added a record $132 billion in new assets — toppling the previous record set in the fourth quarter of 2016. Yes, some of that money is coming from traders using ETFs for tactical, short-term trades … but data suggests most of the money is coming in from investors that are looking to stick around.
So, contrary to what others might say, ETFs and “buy and hold” are a match made in heaven. That’s particularly true as ETF providers continue to lower fees. The ETF business is a business like any other, where competitors want to beat each other — but lower fees really do benefit investors, too. Particularly those that hold on for the long-term.
Here’s a trio of ETFs that you can buy and hold forever, so you never have to worry about checking in and seeing how things are going. They’ll be just fine.
ETFs to Buy and Hold Forever: Vanguard Value ETF (VTV)
Type: U.S. large-cap value stock
Expenses: 0.08%, or $8 annually on every $10,000 invested
A significant part of the smart-beta boom is “factor-based” investing, and one of the most widely followed investment factors is value. There are dozens of dedicated value ETFs trading in the U.S., but one of the most popular is the Vanguard Value ETF (NYSEARCA:VTV).
The VTV tracks the CRSP US Large Cap Value Index, which is a gauge of large-cap U.S. value stocks. This fund holds 321 stocks with a median market value of $94.2 billion.
Something investors should note that as the current bull market in U.S. stocks ages, true value stocks are getting harder to come by. The result? Many value ETFs end up heavily allocating to energy or financial services (or both). In the case of the VTV, it’s just more than a quarter-weighted in financials. However, top holdings also include the likes of Microsoft Corporation (NASDAQ:MSFT) and Johnson & Johnson (NYSE:JNJ), so it’s hardly all energy and banks.
Still, VTV is perfect for buy-and-hold investors because while value doesn’t always outperform growth/momentum every year, it does win over the long haul. And the mere 0.08% in annual expenses make it less expensive than 93% of competing funds.
In other words, you can dive into VTV on the cheap and never look back.
ETFs to Buy and Hold Forever: iShares Core MSCI EAFE ETF (IEFA)
Type: International large-cap stock
The iShares Core MSCI EAFE ETF (NYSEARCA:IEFA) debuted in late 2012 as part of the iShares core suite of ETFs, a family of funds specifically targeted at cost-conscious, buy-and-hold investors. That group of ETFs has been a hit for iShares, and the IEFA is a big reason why.
This fund is designed to provide cost-effective exposure to the widely followed MSCI EAFE Index — an index of international stocks including Europe, Asia Australia and the Far East. However, IEFA, which tracks the MSCI EAFE Investable Market Index, holds nearly triple the number of stocks found in standard EAFE funds. Top holdings are decidedly international blue-chip in nature, with consumer giant Nestle SA (ADR) (OTCMKTS:NSRGY) and pharma outfit Roche Holding Ltd. (ADR) (OTCMKTS:RHHBY) leading the way.
There is ample support for IEFA among professional investors, as highlighted by the ETF’s $21.7 billion in assets under management. And at 0.08% in fees, not only is this fund cheaper than other EAFE ETFs, but it’s the second-least expensive ex-U.S. developed markets ETF available to American investors.
ETFs to Buy and Hold Forever: Guggenheim Multi-Asset Income ETF (CVY)
Expenses: 0.84% (includes 8-basis-point fee waiver)
Part of investing for the long-term is implementing asset classes into portfolios that extend beyond bonds and common stocks. The Guggenheim Multi-Asset Income ETF (NYSEARCA:CVY) helps investors do that while generating much-needed income, too.
CVY follows the Zacks Multi-Asset Income Index, which means that in addition to common stocks, the fund can hold master limited partnerships (MLPs), preferred stocks and real estate investment trusts (REITs), among other income-generating asset classes. That helps buy-and-hold investors cover a lot of bases when it comes to earning income over the long term.
CVY offers a trailing-12-month dividend yield of 4.4% — well above what investors will find on the S&P 500 or 10-year Treasuries.
As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.