Best ETFs for Long-Term Investing in the US: Core Holdings and Strategy

Long-term success depends on expense ratios below 0.20%, a clear rebalancing rule, tax-aware account placement, and the discipline to stay invested through drawdowns.

Best ETFs for long-term investing in the US: what you need to know

An ETF (an exchange-traded fund, a basket of securities that trades like a share on an exchange) is the default long-term vehicle for US retail portfolios because it combines diversification, low cost, and intraday liquidity.

When you understand the difference between stocks vs. indices, you see why broad index ETFs dominate long-term portfolios. For a multi-decade horizon, you want three things stacked in order:

• A low expense ratio (the annual fee expressed as a percentage of assets).
• Broad index exposure rather than narrow themes.
• A provider with scale and a track record of tight index tracking.

The practical shortlist for most long-term US investors starts with an S&P 500 or total-market core (VOO, VTI, or SCHB), adds international developed and emerging market exposure (VXUS, VWO), and optionally layers a bond ETF such as BND for older investors. Everything else, sectors, thematics, leverage, is a satellite. According to the US Investment Company Institute's 2024 Fact Book, US-listed ETFs held approximately $8.1 trillion in assets at end-2023, with index funds dominating net inflows.

S&P 500 ETFs: VOO, SPY, and IVV compared

VOO, SPY, and IVV all track the S&P 500, the index of 500 large-cap US companies weighted by market capitalisation.

They deliver near-identical gross returns, so the decision comes down to fee, structure, and how you use them. VOO (Vanguard) and IVV (iShares) are structured as open-end funds and reinvest dividends efficiently. SPY (State Street) is a unit investment trust: it holds dividends in cash until distribution, a tiny drag over long holding periods but a plus for options traders who need the deepest liquidity.

For a long-term investor with no options overlay, VOO or IVV is the cleaner pick. SPY earns its keep only if you value the tightest bid-ask spread or trade options against the position.

Expense ratios and total cost of ownership

Expense ratios look trivial on paper and brutal on a compounding curve. A 0.03% fee on a $100,000 position costs $30 per year; a 0.50% fee costs $500. Over 30 years at a 7% gross annual return, the low-cost ETF ends near $761,000 while the 0.50% fund lands near $661,000, a gap of roughly $100,000 on the same underlying index. Vanguard's research group has published this arithmetic repeatedly since John Bogle's original work on cost drag.

Understanding how to build the best investments for passive income starts with this discipline: every basis point of fees compounds against you over decades.

Beyond the headline ratio, watch for tracking difference (how far the ETF's return drifts from the index), bid-ask spread on your broker, and any platform commissions. On US brokers such as Fidelity, Schwab, or Vanguard, most major ETFs trade commission-free, so the expense ratio and spread are your real total cost.

Diversification beyond the S&P 500

A portfolio of only large-cap US stocks concentrates you in about 500 companies, with the top 10 names accounting for roughly a third of the S&P 500 by weight as of early 2025 (per S&P Dow Jones Indices index data).

Total-market ETFs like VTI or ITOT extend that to about 3,700 US listings, capturing small-cap and mid-cap growth that the S&P 500 misses. Small-cap sleeves (VB, IJR) and mid-cap sleeves (IJH, VO) can be added deliberately if you want a size tilt.

Geography is the bigger gap. The US is roughly 60% of global equity market capitalisation according to MSCI's 2024 ACWI factsheet, meaning a US-only portfolio ignores 40% of investable equity.

VXUS (Vanguard Total International Stock ETF) covers developed and emerging markets ex-US in one line; VWO isolates emerging markets if you want a separate lever.

For US investors seeking international exposure, popular American ETFs and their European equivalents shows how the same index themes trade across regions. A common long-term split is 70% US, 30% international, adjusted for your view on currency and valuation.

Tax efficiency and tax-loss harvesting for ETF portfolios

ETFs are structurally more tax-efficient than mutual funds in US taxable accounts because they use in-kind creation and redemption, which lets the fund flush out low-basis shares without realising capital gains at the fund level. That is why broad-index ETFs like VTI or VOO rarely distribute capital gains, while comparable mutual funds often do. IRS Publication 550 confirms that distributed capital gains are taxable to the shareholder in the year received, even if you reinvest them.

Tax-loss harvesting is the second lever. If VTI drops 15% below your cost basis, you can sell it, book the capital loss to offset gains elsewhere or up to $3,000 of ordinary income per year under current IRS rules, and immediately buy a similar but not substantially identical ETF such as ITOT or SCHB to keep market exposure. The systematic discipline of dollar-cost averaging teaches the same principle: regular, methodical action beats emotional timing. Wait 31 days before repurchasing the original to avoid the wash-sale rule. This is the sort of routine discipline most competitor guides skip.

[IRS Publication 550, 2024 edition]: Capital losses offset capital gains without limit and up to $3,000 of ordinary income per year; wash-sale rules disallow losses if a substantially identical security is repurchased within 30 days.

Rebalancing and portfolio maintenance over decades

If you start at 70% US equity and 30% international, a strong US year can push you to 78/22 without you doing anything. Rebalancing pulls the portfolio back to target by selling the outperformer and buying the laggard. Two common rules work: calendar rebalancing (once a year, or semi-annually) and threshold rebalancing (act only when a sleeve drifts more than 5 percentage points from target).

The emotional cost is real: you sell your winners. The mathematical benefit is that you systematically take profit from expensive assets and add to cheaper ones, which improves risk-adjusted return over long periods. In a taxable account, rebalance with new contributions first (buy the underweight sleeve with fresh cash) before selling holdings, to keep realised gains low.

ESG and sustainable ETFs for values-based investing

ESG ETFs screen holdings for environmental, social, and governance criteria, excluding sectors such as fossil fuels, tobacco, controversial weapons, or firms with weak governance scores. In the US market, ESGV (Vanguard ESG US Stock ETF) and SUSA (iShares MSCI USA ESG Select ETF) are the mainstream large-cap choices, both with expense ratios below 0.25% as of 2024 issuer disclosures.

The trade-off is honest: ESG screens reduce the investable universe, which can raise tracking error against a broad index and occasionally trim diversification. Long-term returns of major US ESG ETFs have tracked the S&P 500 within a narrow band since inception, but the correlation is not guaranteed forward. If values alignment matters to you, treat ESG as a core replacement rather than a satellite, and check the underlying screening methodology, not just the label.