ETFs to Buy and Hold for a Long-Term Investment Strategy
Market volatility has remained a defining feature of the investment landscape this year, unsettling investors and putting sustained pressure on equities. Rising economic concerns and escalating geopolitical tensions have added to market uncertainty, making it increasingly difficult for investors to navigate the current environment with confidence.
With volatility showing little signs of easing, investors may face continued market turbulence in the near term. Market conditions could remain challenging through the rest of 2026 and into early 2027, as persistent economic uncertainty and geopolitical risks continue to cloud the outlook and weigh on investor sentiment.
Expectations of prolonged geopolitical uncertainty in the Middle East have pushed oil prices higher, raising concerns that energy-driven inflationary pressures could persist. Meanwhile, growing concerns about the sustainability of the AI-driven market rally, rising AI safety risks and growing apprehension over debt financing for AI investments are weighing on investor confidence and adding pressure on equities.
Beyond higher energy costs, substantial AI-related investments could also fuel inflation, further complicating the Federal Reserve’s policy outlook. With inflation remaining a key concern, markets have increasingly factored in the possibility of further Fed rate hikes. Uncertainty surrounding the timing and likelihood of additional monetary tightening continues to cloud the outlook and weigh on investor sentiment.
This environment highlights the importance of adopting a disciplined investment approach that balances short-term market uncertainty with long-term growth objectives. By maintaining a long-term perspective, investors can avoid reacting impulsively to short-term market movements and remain focused on their broader investment goals. As a result, investors are likely to move towards strategies like buy-and-hold.
The Case for a Buy-and-Hold Approach
Buy-and-hold is a classic investment strategy that offers a passive approach, ideal for investors seeking sustainable, long-term returns. By staying invested through both bull and bear markets, buy-and-hold investors allow their portfolios and investments to grow and compound over time, without being swayed by short-term market fluctuations.
Staying invested also helps investors avoid missing sharp market rallies, which can significantly affect long-term returns.
This strategy is particularly effective for building wealth and managing risk, appealing to long-term investors who prefer a hands-off approach and are less concerned with short-term market volatility. For new investors, buy-and-hold can be especially prudent, helping reduce exposure to market swings while fostering disciplined investing habits.
A key benefit of buy-and-hold is its ability to reduce the impact of investor emotions on investment decisions. It removes emotional behavior from investing, preventing investors from overtrading and making impulsive decisions like panic selling during downturns or overbuying in a rally, which can harm their portfolio.
A buy-and-hold strategy also eliminates the need to time the market, which can be challenging even for seasoned investors. Market timing means buying or selling investments based on predictions of market movements, requiring constant monitoring and precise entry and exit decisions. This makes it a time-consuming and challenging strategy to execute consistently. Applying this strategy to broad-market ETFs can further simplify investing by providing diversified exposure to the U.S. equity market without requiring investors to identify individual stock winners.
This makes buy-and-hold a relevant strategy in the current uncertain economic environment, marked by geopolitical tensions, uncertainty around the Fed’s policy path and persistent inflationary pressures.
ETFs to Buy and Hold
Using ETFs to implement the strategy gives the additional benefit of instant diversification and tax efficiency. Below, we have highlighted a few ETFs that investors can buy and hold.
S&P 500 ETFs
Investors seeking to build a more balanced and diversified portfolio should consider funds that track major indexes, such as the S&P 500. These funds can also serve as a prudent diversification option. Over the long term, well-capitalized, stable large-cap funds can be a smart choice for investors seeking to build a balanced and diversified portfolio.
Investors can consider Vanguard S&P 500 ETF VOO, iShares Core S&P 500 ETF IVV, State Street SPDR S&P 500 ETF SPY and State Street SPDR Portfolio S&P 500 ETF SPYM, which track the S&P 500. All four funds are among the largest in the United States. In terms of annual fees, SPYM is the cheapest option, charging 0.02%.
A More Balanced Way to Play the S&P 500
Investors optimistic about the benchmark index but seeking a more balanced approach with a comparatively lower risk profile may consider equal-weighted ETFs tracking the index.
These funds offer sector-level diversification by assigning equal weight to each constituent stock, regardless of market capitalization, thus reducing concentration risk. This makes them an attractive option for investors seeking broader diversification across the U.S. equity market and a potentially more balanced risk profile.
Investors can consider Invesco S&P 500 Equal Weight ETF RSP, ALPS Equal Sector Weight ETF EQL and Invesco S&P 100 Equal Weight ETF EQWL. RSP tracks the S&P 500 Equal Weight Index, while EQL replicates the performance of VettaFi Modelist Equal Weight Sector 500 Index. EQWL replicates the performance of S&P 100 Equal Weight Index.
Dividend ETFs
Dividend-paying securities serve as primary sources of reliable income for investors, particularly during periods of equity market volatility. These stocks offer dual advantages — safety, in the form of payouts, and stability in the form of mature companies that are less volatile to large swings in stock prices. Companies offering dividends often act as a hedge against economic uncertainty.
Investors can consider Vanguard Dividend Appreciation ETF VIG and Vanguard High Dividend Yield Index ETF VYM, with dividend yields of 1.52% and 2.31% (as of Oct. 16), respectively. Regarding annual fees, both VIG and VYM charge 0.04%.
Gold ETFs
A stronger U.S. dollar and the Fed’s hawkish stance to curb inflation have weighed on gold prices, constraining the metal’s near-term performance. However, strong inflows into gold ETFs and continued central bank purchases, particularly China’s, provide structural support for the precious metal, reinforcing its long-term bullish outlook.
Beyond its potential for price appreciation, gold remains an important portfolio diversifier and a hedge against economic uncertainty and market volatility. These characteristics make gold ETFs worth considering for investors seeking strategic exposure to the precious metal as part of a diversified, long-term portfolio (Read: Here’s Why Gold ETFs Still Make Sense for Long-Term Investors).
Investors can consider SPDR Gold Shares GLD, iShares Gold Trust IAU and iShares Gold Trust Micro IAUM to increase their exposure to the yellow metal. Regarding annual fees, IAUM is the cheapest option, charging 0.09%, which makes it suitable for long-term investing.
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SPDR Gold Shares (GLD): ETF Research Reports
iShares Gold Trust (IAU): ETF Research Reports
State Street SPDR S&P 500 ETF Trust (SPY): ETF Research Reports
Vanguard Dividend Appreciation Index Fund ETF Shares (VIG): ETF Research Reports
Vanguard 500 Index Fund ETF Shares (VOO): ETF Research Reports
Invesco S&P 500 Equal Weight ETF (RSP): ETF Research Reports
iShares Core S&P 500 ETF (IVV): ETF Research Reports
Invesco S&P 100 Equal Weight ETF (EQWL): ETF Research Reports
Vanguard High Dividend Yield Index Fund ETF Shares (VYM): ETF Research Reports
ALPS Equal Sector Weight ETF (EQL): ETF Research Reports
State Street SPDR Portfolio S&P 500 ETF (SPYM): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).