What is the safest ETF to buy?

Best & Safest Long-Term ETFs to Buy and Hold

Reading Time: 12 Minutes

There is no best and safest investment. Investors are unique and have different goals, expectations, trading strategies, and styles.

While safer investments are available with less default risk, they may not suit all traders, such as short-term day traders (day trading) or scalpers (scalping).

Long-term Exchange Traded Funds (ETFs) investing offers an interesting investment vehicle and a way to manage a portion of your investment portfolio. Long-term growth stocks, for example, can be traded through long-term ETFs.

ETFs are a basket of securities traded on the stock exchange. The three most popular held stocks in ETFs are Apple Inc. Microsoft Corporation and Amazon.com. ETFs can also be managed either actively or passively. While actively managed ETFs aim to exceed a benchmark, passively managed ETFs strive to match a specific benchmark.

Are ETFs Easy to Sell?

Most traders only consider how to purchase an ETF, often referred to as going long, but you can also sell an ETF (going short). The simplest and most obvious approach to short an ETF is to issue a sell order with your brokerage account.

A quick buy or sell order for a security is known as a market order. Although the execution of the order is guaranteed with this form of order, the execution price is not. A market order will typically be executed at, or very near, the current ask (for a purchase order) or bid (for a sell order) price. Nevertheless, investors should remember that market orders may not be filled at the same price as the last traded price.

An order to purchase or sell a security at a certain price or better is known as a limit order. Only at the limit price or lower can a purchase limit order be fulfilled, and only at the limit price or greater can a sell limit order be fulfilled.

The Buy-and-Hold Investment Strategy

Buy-and-hold is a passive investment technique where an investor purchases stocks (or other securities like ETFs) and holds them for a considerable time without considering short-term market movements. What is the buy-and-hold strategy's main benefit? Investors use a buy-and-hold strategy to maintain a largely stable portfolio over the long term, despite short-term swings.

Can I Hold an ETF Long-Term?

The simple answer to this question is yes, you can hold ETFs long-term. Investors include them in their portfolios for retirement, for example.

Listed below are some first-rate ETFs that investors can use for long-term investment:

      1. Vanguard 500 Index Fund (NYSE: VOO)

Vanguard 500 tracks the S&P 500 Index. It includes 500 of the biggest U.S blue-chip companies based on their market cap, including Tesla inc, Camden Property Real Estate Trust, and United Health Care Group Inc.

       2. iShares Russell 2000 ETF

The iShares Russell 2000 ETF is one of the better value small-cap investment funds. Small-cap stocks can be volatile but can offer more upside. Several future industry giants can be found in their initial stages, and early investors could see optimum profits from their investments.

       3. Schwab U.S. Dividend Equity ETF

This ETF holds 100 individual assets, including dividend stocks offering diversification options, such as a ten-year track record of distributing dividend yields to its investors.

Schwab U.S. Dividend Equity ETF consists of reliable and sustainable companies, such as Home Depot, PepsiCo, and Pfizer.

       4. iShares Core U.S. Aggregate Bond ETF (AGG)

AGG is among the top ten ETFs on Wall Street and is the largest exchange-traded bond ETF fund by assets. With approximately 10,000 assets that provide exposure to the entire spectrum of the investment-grade bond market, including both government and corporate bonds, it is also comprehensive and diversified as an aggregate bond fund.

This bond fund's current yield of 3.2% is approximately double that of the S&P 500 of around 1.6%. Additionally, the iShares fund has modest charges with a record-low expense ratio of only 0.03%, or $3 on every $10,000 invested yearly.

As with any trading, there are risks involved. There are many ETFs to choose from, so when you think of an ETF for the long term, research as many ETFs as possible before investing.

What ETF is the Most Stable?

All investors are unique and possess unique investment goals. The most stable ETF is an ambiguous question. For example, what is the best ETF is frequently asked, and the answer is no one ETF is the best, most profitable, safest, most stable, or best value ETF. As stated above, traders are unique and what is considered best for one investor does not suit all traders.

Listed below are passive ETFs that some consider more stable than active ETFs:

  • Invesco S&P 500 Low Volatility ETF (SPLV)

A defensive strategy that could be attractive to long-term investors looking beyond the typical S&P 500 ETF index funds is to seek out stocks that move with less volatility than their peers. In a bull market, this could, however, mean losing out on significant increases.

SPLV is a $10 billion (US) fund comprising the 100 stocks that exhibit the lowest volatility over the past 12 months. SPLV top holdings include, Johnson & Johnson, McDonald's Corporation, and PepsiCo Inc.

  • Select Sector for Consumer Goods PSD ETF (XLP)

Consumer staple stocks might offer security from a volatile market. With a market cap of $15 billion and liquidity of 9 percent through early October 2022, XLP is one of the largest and most liquid methods to invest in this sector. Its losses have been less than half as great as those of a typical large-cap fund. Top individual stocks include predictable but dependable corporations expected to endure for many years, such as Coca-Cola Co. and Procter & Gamble Co.

Which ETF Has the Highest Return?

     1. Invesco Solar ETF.

     5-Year Return: 233.43%.

     Assets under management (AUM): US $2,545,000.00.

     2. NASDAQ Clean Edge Green Energy Index Fund.

     5-Year Return: 187.97%.

     Assets under management (AUM): US $2,096,520.00.

     3. ProShares Ultra Technology.

     5-Year Return: 144.14%

     Assets under management (AUM): US $354,689.00.

     4. SPDR S&P Semiconductor ETF.

     5-Year Return: 131.68%.

     Assets under management (AUM): US $1,056,470.00.

     5. Direxion Daily Technology Bull 3X Shares.

     5-Year Return: 127.68%.

     Assets under management (AUM): US $$1,276,870.00.

How Much Money Do You Need to Start an ETF?

Steps to launch and Fund an ETF:

  • Registration Cost:

Depending on the ETF fund, registration costs are between US$100,000 and US$500,000.

  • Cost Of Licensing an Index:

The cost of licensing an index is a low-cost expense (0.03%) if you are just starting out and have a US$10 million ETF.

That's barely US$3,000 per year at 0.03%. But as the fund expands, so does the expense of licensing.

  • Seeding the ETF:

The capital needed is at least US$2.5 million.

  • Listing Fees:

Listing fees vary depending on what type of ETF and which exchange you use. Below is an example of the NASDAQ fees:

For ETFs, the minimum investment is US$5,000, plus a US$1,000 non-refundable application charge. No matter how many ETFs are listed, Nasdaq caps fees at US$14,500 per issuer.

  • Cost of Marketing:

This cost is often overlooked. If you don't have a marketing budget, how will people know about the ETF?

How much marketing depends on your budget and the size of the ETF, but it is important to market your ETF professionally to gain exposure.

  • Running Cost:

Expect to spend around US$250,000 to US$500,000 yearly for one ETF.

Starting your ETF is not something a novice should try to accomplish alone. You can consider hiring a financial advisor (fund manager) to find more information, if you have the required funds, of course.

Sound knowledge of the markets and investing is required to start an ETF. FP Markets has a comprehensive section on trading ETFs, head over to their website for more information.



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