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Learn how to choose the best ETF for your long-term investment portfolio.
Long-term investors often look for ETFs that they can hold for years or an entire investment period (possibly decades). Thus, in the long run, the best ETFs are likely to include a diverse set of ETFs with low fees, high managed assets, and a history of long-term performance.
How to choose the best ETF for long-term investments
The way to evaluate the best ETF over the long term is not the same for every investor; however, there are some general guidelines you can follow. For example, since most ETFs passively track benchmark indices, low fees are an advantage of long-term performance. Other standards include asset management and performance history.
The selection criteria for selecting the best ETF include:
Fee rate: When evaluating ETFs that track the same index, the ETF with the lowest fee rate usually performs better than the ETF with the higher fee rate.
Assets under management: Large ETFs or ETFs with higher AUM tend to have higher trading volumes, which can lead to higher pricing through lower bid-ask spreads.
Performance history: While past performance is no guarantee of future results, long-term performance history can provide clues about how close an ETF is to its benchmark and how well it is performing compared to similar products.
Best types of long-term ETFs to invest in
The best type of ETF to build a long-term portfolio depends on the portfolio structure chosen by the investor, which may...