Index ETFs have outperformed the majority of actively managed funds over the past 20 years, yet picking the right one still trips up a lot of new investors. With hundreds of options available, knowing which funds to look at first can save a lot of time.
This list covers several well-regarded ETFs across different goals, from broad market exposure to dividend income and technology growth. None of this is a buy recommendation. Think of it as a starting map.
Our Top Picks
VOO: Vanguard S&P 500 ETF
VOO tracks the S&P 500, which holds 500 large U.S. companies. It has an expense ratio of 0.03%, which is among the lowest available. Over the past decade, it has closely matched the performance of the broader market.
This is often the first ETF financial educators recommend for beginners. You get exposure to companies like Apple, Microsoft, Amazon, and Nvidia in a single purchase. If you're weighing VOO against its closest rival, see our SPY vs VOO comparison.
VTI: Vanguard Total Stock Market ETF
VTI goes broader than the S&P 500 by including mid-cap and small-cap U.S. stocks in addition to large caps. Its expense ratio is also 0.03%.
If you believe smaller companies can add long-term return potential, VTI offers that exposure while remaining highly diversified. It holds over 3,700 stocks. For a direct head-to-head of these two total-market options, see FZROX vs VTI.
QQQ: Invesco QQQ Trust
QQQ tracks the Nasdaq-100, which is heavily weighted toward technology companies. It includes firms like Apple, Microsoft, Nvidia, Meta, and Alphabet.
QQQ has delivered strong returns in recent years as tech has outperformed the broader market. However, it is more concentrated and more volatile than a broad market fund. During tech downturns, QQQ can fall harder than VOO or VTI. Its expense ratio is 0.20%. For a direct comparison of these two popular ETFs, see our SPY vs QQQ breakdown.
SCHD: Schwab U.S. Dividend Equity ETF
SCHD focuses on dividend-paying U.S. stocks with a history of consistent payouts. It screens for financial quality metrics like return on equity and debt-to-equity ratio.
This fund appeals to investors who want income from their portfolio or who prefer more stable, cash-generating businesses. Its expense ratio is 0.06%, and its dividend yield has historically been in the 3-4% range.
VXUS: Vanguard Total International Stock ETF
VXUS gives you exposure to non-U.S. stocks across developed and emerging markets. It holds over 8,000 international companies.
Many portfolio builders pair VXUS with VTI or VOO to diversify geographically. The U.S. market has led the world in returns for the past decade, but that hasn't always been true historically, and international diversification can reduce concentration risk.
BND: Vanguard Total Bond Market ETF
BND holds U.S. government and corporate bonds across different maturities. It is designed to reduce portfolio volatility rather than maximize growth.
Investors closer to retirement or those with a lower risk tolerance often hold a portion of bonds. BND's expense ratio is 0.03%.
Where to Buy These ETFs
Robinhood lets you trade all of these ETFs with no commissions and offers fractional shares, so you can invest in VOO or QQQ with any dollar amount rather than needing to buy a whole share. Opening an account takes about 10 minutes.
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How to Choose the Right ETF for You
The best ETF for you depends on several factors:
Your time horizon. If you're investing for 20+ years, you may be comfortable with higher-volatility options like QQQ. If you need the money in 5-7 years, a more balanced mix with bonds may reduce your risk.
Your goal. Building long-term wealth with minimal effort points toward broad market funds like VTI or VOO. Seeking income points toward SCHD. Reducing U.S. concentration points toward VXUS.
Your existing portfolio. If you hold a 401(k) mostly in a target-date fund, you may not need a separate bond ETF. If your employer plan only offers expensive funds, a low-cost ETF in a personal Roth IRA can complement it.
Expense ratios. Always check. The difference between 0.03% and 1.00% compounded over 30 years is significant. Broad index ETFs from Vanguard, Fidelity, and Schwab consistently rank among the lowest-cost options.
A Note on Performance and Expectations
Past returns do not guarantee future results. QQQ's strong recent performance reflects a period when technology dominated markets. That may or may not continue.
Broad market ETFs like VTI and VOO provide returns roughly equal to the overall U.S. economy over time, which has historically averaged around 7% annually after inflation. That's a meaningful return over decades, even without picking winning sectors.
Many financial professionals suggest keeping things simple: pick one or two low-cost, broadly diversified ETFs, invest consistently, and don't check your balance every day.
This article is for educational purposes only and does not constitute financial advice. All investing involves risk, including the possible loss of principal. Past performance does not predict future results. Consider consulting a licensed financial advisor for personalized guidance.
Frequently Asked Questions
What is an ETF and how does it differ from a mutual fund?
An ETF (exchange-traded fund) holds a basket of stocks or bonds and trades on a stock exchange throughout the day, just like a stock. A mutual fund also holds many assets but is priced once daily after the market closes. ETFs typically have lower expense ratios than mutual funds and can be bought in smaller amounts through fractional share programs.
Is it better to buy VOO or VTI?
Both are excellent low-cost choices. VOO tracks 500 large U.S. companies while VTI adds thousands of smaller ones. Historically, the difference in returns has been small. If you want slightly broader exposure and believe smaller companies may outperform over time, VTI offers that. If you prefer simplicity with the most well-known index, VOO works equally well.
Can I lose money in an ETF?
Yes. ETFs track the assets they hold, so if the market or sector they track drops, your ETF value drops with it. Broad market ETFs have recovered from every historical downturn, but that recovery can take years. Investing money you may need in the short term in a stock ETF carries real risk.
How many ETFs should a beginner own?
Many financial educators suggest starting with one or two. A single broad market ETF like VTI covers thousands of companies and provides strong diversification on its own. Adding an international fund like VXUS and a bond fund like BND can round out a basic portfolio. More complexity doesn't always mean better results.
