With a 40-year investing window, which ETFs are right for me?

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When it comes to growing your money, one of the greatest tools at your disposal is time. The more years you give your investments to grow, the more wealth you might end up with.

But when you’re new to investing, it can be tricky to know which assets to add to your portfolio. For this reason, you may want to favor ETFs, or exchange-traded funds, over individual stocks.

ETFs allow you to invest in a bunch of different companies at once. In this Reddit post, we have a 22-year-old investor with a long investing horizon ahead of them. They want to know which ETFs to consider.

Given that a 22-year-old may easily have a good 40 years until retirement, it’s important to focus on ETFs that lend to diversification and growth. Here are three that someone with a long investment window may want to consider.

The Vanguard S&P 500 ETF (VOO)

The Vanguard S&P 500 ETF (VOO) aims to match the performance of the S&P 500 index. The S&P 500 consists of the 500 largest publicly traded companies.

The inherent advantage here is that you’re getting access to 500 different companies across a range of industries, all of which are larger, established businesses. But there are a few limitations of VOO you should know about.

First, since it only invests in S&P 500 companies, you’re missing out on small and mid-cap stocks. Also, the S&P 500 is a market cap-weighted index, which means the companies with the largest market cap influence it the most. This also means that if a few select S&P 500 companies suddenly lose value, VOO’s share price could plummet.

Over time, VOO could still be a pretty stable investment, though. The stock market will naturally rise and fall through the years, but with four decades to ride out downturns, it’s a reasonable bet.

The Vanguard Total Stock Market Index Fund ETF (VTI)

The Vanguard Total Stock Market Index Fund ETF (VTI), like the name implies, invests in the entire stock market. This means you get access to companies of all sizes.

That can be advantageous, because while smaller and even mid-cap stocks can carry more risk, the gains they produce can also be more substantial. And compared to VOO, you’re getting more diversification with VTI.

That said, VTI only invests in U.S. companies. You may want to pair it with an ETF that invests in international stocks to branch out a bit more.

The Schwab US Dividend Equity ETF (SCHD)

The Schwab US Dividend Equity ETF (SCHD) tracks the Dow Jones U.S. Dividend 100 Index. SCHD doesn’t just chase the highest dividends. It also focuses on companies’ financial health, as well as consistency in dividend payouts.

The companies SCHD invests in also tend to have a history of increasing their dividends, which means it could be a good income producer for your portfolio. Plus, strong, steady dividends can serve as a hedge against overall market volatility. If you’re being paid generous dividends, that can help offset share price declines during market downturns.

Of course, one drawback of SCHD is that it often falls behind funds like VOO or VTI during periods of strong market gains. That makes sense, because growth stocks, by nature, do not tend to pay generous dividends.

Also, SCHD is less diverse than a fund like VTI. You may want to pair it with VTI for more market exposure.

Ultimately, any of these investments could be a good choice for the next 40 years. And you may want to invest in all three for maximum financial benefit.

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