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5 Perfect ETFs to Buy for a Set-It and Forget-It Portfolio

Barbara Friedberg

This year was a rocky one for investors. On December 31, 2018, the stock market indices were a sea of red. At Friday’s market close, the Dow Jones Industrial Average was down 5.6%, the Nasdaq Composite lost 3.9% and the S&P 500 was off 6.2% for the year. These exchange-traded funds will keep your investments diversified and poised for a market recovery in 2019.

Now, for long-term investors, this shouldn’t be a problem. If you don’t need to sell your investments to pay for living expenses, then sit tight. History has proven that investment markets are resilient and typically rebound to higher levels after a market decline. In fact, now is a perfect time to rebalance your existing stock and bond funds back to their desired allocation. You’ll be buying more holdings at bargain prices.

Lazy investors, seeking a smart, tax-efficient, low fee investment portfolio that’ll go the distance should look at low fee funds and consider equal weight indexes as well as the traditional market cap funds. Equal weight indexes give more heft to smaller companies than the typical market weight index funds.

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For 2019 planning, no one knows the future. So, the best approach is to stick with a well-diversified investment portfolio, because you don’t know which sectors or investment styles will prevail. In a nod to the simplicity movement, we’ll stick with the lowest fee funds that cover the entire world of stocks and bonds. Bonds will tilt toward intermediate maturities as rising interest rates can damage longer-term bond values.

If you’re seeking the easiest investing route, especially if retirement is your goal, then a target date fund or robo-advisor is a good option.

For investors looking for a long-term investment portfolio, structured to go the distance, here are several of the best ETFs to buy for a simple “set-it and forget-it” portfolio in 2019. Invest in the proportions that best fit your risk comfort level, with greater stock fund allotments if you’re a young and aggressive investor. If not, lean toward a greater proportion of conservative bond funds.


Schwab U.S. Broad Market ETF (SCHB)

Price: $59.93
Yield: 1.68%
Expense Ratio: 0.03%

The first fund on this list of ETFs to buy is the Schwab U.S. Broad Market ETF (NYSE:SCHB). This market-capitalization weighted index fund tracks the Dow Jones U.S. Broad Stock Market Index, that includes 2,500 publicly traded U.S. companies. The expense ratio is among the lowest available.

Its top holdings include heavyweights like Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL) Amazon (NASDAQ:AMZN), Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B), Johnson and Johnson (NYSE:JNJ) and JP Morgan Chase (NYSE:JPM).

If you’re seeking an equal weight U.S. stock index, take a look at this S&P 500 equal weight fund.


Invesco S&P 500 Equal Weight ETF (RSP)

Price: $91.40
Yield: 1.74%
Expense Ratio: 0.20%

Invesco S&P 500 Equal Weight ETF (NYSE:RSP) is an equal weight fund that tracks the investment returns of the S&P 500A® Equal Weight Index. The higher fees, reflect the greater management required of an equal weight versus market cap weighted index. An equal weight index fund typically has a value bent, in contrast with a market cap weighted fund, which leans toward a momentum style. In RSP, all S&P 500 benchmark stocks are owned in approximately the same weight.

Despite the recent disappointing international investment returns, it’s wise to go beyond the U.S. when seeking a diversified long-term investment portfolio.


Vanguard FTSE All-Wld Ex-US ETF (VEU)

Price: $45.58
Yield: 3.11%
Expense Ratio: 0.11%

Vanguard FTSE All-Wld Ex-US ETF (NYSE:VEU) tracks an international stock market index — the FTSE All-World ex US Index — that measures the returns of international companies from the developed and emerging markets. The index includes 2,539 stocks of companies located in 46 countries. The fund’s holdings include 21% in Emerging Markets, 42% in Europe, 30% in the Pacific, 6% in North America, with the remainder in other regions.

Bond investments balance out the volatility of the stock market. If you’re in a higher tax bracket and investing in a taxable account, then you might consider this municipal bond fund.


iShares National Muni Bond ETF (MUB)

Price: $109.04
Yield: 2.45%
Expense Ratio: 0.07%

iShares National Muni Bond ETF (NYSEARCA:MUB) is a municipal bond index fund that tracks the investment results of the S&P National AMT-Free Municipal Bond IndexTM . The index tracks investment-grade municipal bonds.

Investing in MUB provides investors in higher tax brackets with income that’s free from federal taxes.


Vanguard Interm-Term Corp Bd ETF (VCIT)

Price: $82.86
Yield: 3.60%
Expense Ratio: 0.07%

Vanguard Interm-Term Corp Bd ETF (NASDAQ:VCIT) is a medium-term bond fund that tracks the Barclays U.S.5-10 Year Corporate Bond Index. The market-weighted index fund owns investment-grade fixed-rate corporate bonds with maturities from five to 10 years. With only two rate hikes predicted this year, you might eek out a higher return than with a shorter-term fund. Regardless, interest will be reinvested in higher-yield corporate debt.

Bottom Line

These ETFs to buy will set long-term investors up for a diversified 2019. But, if you want an even easier investment route, then let a robo-advisor do the heavy portfolio management lifting, for nominal fees.

Finally, for greater diversification, you could delve into international bonds such as the Vanguard Total International Bond ETF (NASDAQ:BNDX). For more conservative fixed investing, consider the Vanguard Short Term Bond Fund (NYSE:BSV).

Ultimately, no one knows where investment markets will end up at this time next year. That’s why prudent investors, stay in the markets and diversify their investments.

Barbara A. Friedberg, MBA, MS is a veteran portfolio manager, expert investor, and former university finance instructor. She is editor/author of Personal Finance; An Encyclopedia of Modern Money Management and two additional money books. She is CEO of Robo-Advisor Pros.com, a robo-advisor review and information website. Additionally, Friedberg is publisher of the well-regarded investment website Barbara Friedberg Personal Finance.com. Follow her on twitter @barbfriedberg and @roboadvisorpros. As of this writing, she holds positions in  RSP and VEU.

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