If I Could Only Own 1 ETF for the Next 20 Years, Here's Exactly What I'd Pick and Why
With such a long investment horizon, the choice is simple.
The question of which single ETF to invest in for the next two decades is a common one. For the author of this piece, the Vanguard Information Technology ETF (VGT) stands out as the ideal choice. The rationale behind this decision is grounded in the history of long-term growth, the dominant role of technology in the market, and the specific attributes of the Vanguard Information Technology ETF.
Growth funds have consistently outperformed other investing styles over extended periods. The longer the investment horizon, the more time the fund has to harness the power of compounding and navigate market fluctuations. The technology sector, which has driven the market for the past four decades, is expected to continue its influence for many more years to come.
The Vanguard Information Technology ETF is a strong choice within the technology sector. It offers the broadest exposure to technology stocks, holding approximately 318 technology-oriented companies. This diversification is advantageous given the sector's volatility. The ETF is structured to track the MSCI US Investable Market Information Technology 25/50 Index, which includes large, medium, and small U.S. companies involved in information technology.
This includes internet services, data centers, cloud networking, storage infrastructure, consulting, hardware, equipment, and semiconductor manufacturing.
When compared to other tech ETFs, the Vanguard Information Technology ETF has performed the best over the past 20 years. While it is a sector fund and thus inherently more risky, it includes a wider range of tech stocks from different sizes and parts of the sector. The ETF boasts a low expense ratio of just 0.09%.
For a 20-year investment period, the author recommends the Vanguard Information Technology ETF or a similar tech-focused ETF over alternatives such as a broad-based S&P 500 fund. The VGT ETF has historically outperformed the large-cap benchmark, making it the preferable core holding for a long-term investor. However, it's important to note that there are no guarantees, and investors with a lower risk tolerance may prefer a more conservative ETF like the Vanguard S&P 500 ETF (VOO).
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