If I had to pick just ONE ETF to buy and hold forever: A Comprehensive Analysis

YouTube video

Investing Simplified – Professor G, a popular YouTube channel, is known for simplifying complex investment concepts for its viewers. One common question asked on the channel is, “If you had to choose just one ETF to buy and hold forever, which one would it be?” In this article, we will provide an in-depth analysis of the main ETF options mentioned in the video transcript and ultimately reveal the top choice.

Before jumping into the analysis, it’s important to note that each investor should consider their own goals and factors when making investment decisions. While the YouTuber shares their personal favorite ETF, it is essential to conduct thorough research and choose the one that best aligns with individual investment objectives.

International ETFs

The first category discussed in the video is international ETFs. Given the current political climate, diversifying investments outside the United States can be a prudent strategy. Two notable options in this category are VXUS and SCHY. Both of these ETFs offer exposure to companies located entirely outside the United States and provide a solid dividend yield.

In terms of total return potential, international ETFs generally yield around three to four percent on average. However, it is important to consider the potential impact of events like a U.S. default on the returns. The volatility of these ETFs is relatively low and consistent, but the overall risk is higher due to venturing outside the U.S.

Basic Broad Index or Foundational ETFs

The next category focuses on basic broad index or foundational ETFs. These ETFs, such as VTI and VOO, track the entire U.S. stock market or the S&P 500, respectively. They are considered essential holdings in any investment portfolio. Historically, these ETFs have produced an average annual appreciation of about 10 percent since the introduction of the S&P 500 in 1957.

In terms of total return potential, these ETFs offer a moderate designation. While they may not experience exponential growth, they have shown consistent performance over time. The volatility is relatively low, even during periods of market fluctuations. Overall, these ETFs are considered low risk due to their diversified nature.

Dividend ETFs

The third category looks at dividend ETFs, with the popular pick being SCHD. Dividend ETFs offer investors the benefit of both share price appreciation and dividends, providing a potential source of passive income. SCHD, in particular, has shown strong performance with an average yearly appreciation of over 13 percent since its inception.

Volatility in dividend ETFs is considered medium, partly due to the limited amount of historical data available. However, given the makeup of value-type companies within these funds, they tend to be more resistant to drastic drops in value. The overall risk is generally low, making dividend ETFs appealing to investors seeking stable returns.

Growth ETFs

Finally, the growth ETF category encompasses ETFs focused on innovative companies, particularly in artificial intelligence and technology. Notable examples mentioned in the video include QQQ and SCHG. These ETFs have demonstrated high total return potential, with average annual appreciations of almost 18 percent and 14.5 percent, respectively, over the past decade.

However, with high potential returns comes higher volatility. While these growth ETFs can experience outstanding years of significant returns, they are also susceptible to downturns or technological disruptions. Consequently, the overall risk associated with growth ETFs is considered medium.

The Top Choice

After analyzing each category and considering the overall risk, the YouTuber reveals their top choice for the one ETF they would invest in forever: VOO. This decision is based on the availability of long-term data and the ETF’s ability to weather market storms. VOO, which tracks the performance of the S&P 500, has proven to be a solid and consistent performer over time.

However, it is important to note that investors do not have to limit themselves to just one ETF. The video highlights the importance of diversification and recommends a mix of ETFs and stocks in an investment portfolio. The ideal number of ETFs and stocks can be explored further in another video by the YouTuber.

In conclusion, when selecting an ETF to buy and hold forever, it is crucial to consider individual investment goals and conduct thorough research. While VOO is the top choice based on the given criteria, investors should explore a range of ETFs and create a diversified portfolio that aligns with their specific investment objectives.