ETFs to Keep Your Portfolio on Track in the Long Term

The S&P 500 ended November relatively flat, bringing its year-to-date gains to 17%. This headline number doesn’t fully capture the index’s performance throughout the month. November saw meaningful swings, reflecting the ongoing volatility in both the market and the broader economy.

However, the market outlook for the next year is turning out to be optimistic, supported by favorable economic conditions. Fueled by rising expectations of a December Fed rate cut and strong AI-driven earnings growth, optimism on Wall Street has strengthened. Investor confidence is returning, pushing markets back toward risk-taking. Increasingly, more firms share this upbeat outlook, suggesting that the next phase of the bull market still has room to run (Read: ETFs to Benefit From Rate Cut Bets and Upbeat Forecasts).

Per FactSet data, as quoted on etf.com, in November, U.S.-listed ETFs attracted about $148 billion in inflows, taking the year-to-date inflows to $1.27 trillion and setting a new annual record with still a month to go in the year. If the current pace continues, 2025 net creations could surpass $1.4 trillion.

With several top banks forecasting the S&P 500 to reach 7,500-8,000 by the end of next year, long-term investors may be better off staying invested rather than reacting to short-term volatility.

Strategies to Play the Long Game

Investors may benefit from adopting a passive, long-term investment approach to help build a resilient and stable portfolio. Such strategies can cushion against short-term market pullbacks while positioning investors for sustainable growth over time.

Adopting passive, long-term strategies helps create long-term momentum by ignoring short-term price fluctuations, supports wealth accumulation and minimizes the impact of emotional decision-making. By avoiding impulsive actions, such as panic selling during market dips or overbuying during sharp rallies, investors can remain focused on long-term goals.

Investors who stay invested throughout economic cycles tend to outperform those who attempt to time their market entries and exits, reinforcing the principle of "time in the market, not timing the market." This disciplined approach will become even more valuable as markets evolve and new economic conditions take shape in the future.

Buy and Hold

Buy-and-hold is a classic strategy offering a passive investment approach, ideal for investors seeking sustainable long-term returns. Buy-and-hold investors stay invested, regardless of bull or bear markets, letting their investments grow and compound over the years without being influenced by short-term market developments.

Buy and hold can be an ideal strategy for building wealth and managing risk, benefiting long-term investors who are less concerned about short-term market volatility or who prefer a more hands-off investment approach.

Dollar-Cost Averaging

Dollar-cost averaging (DCA) is a strategy that helps investors navigate market uncertainty by automating security purchases, thus encouraging consistent and disciplined investing over time. Using dollar-cost averaging to steadily build positions without trying to time the market can be a winning strategy.

DCA involves investing a fixed amount at regular intervals, regardless of the security’s price and current market conditions. By doing so, investors may lower their average cost per share and minimize the impact of market volatility on their portfolios. When prices recover, the potential gains will be even greater. Investors can also complement DCA by buying the dip during short-term pullbacks to further average down their entry costs.

For new investors, dollar-cost averaging is a smart strategy, as it helps reduce market volatility by spreading out purchases and avoids the risk of investing a large sum at once. Additionally, for less-informed investors, DCA is a reliable and safe option when applied to ETFs tracking index funds.

Below are several ETFs that investors can consider to implement the mentioned strategies. ETFs offer the additional benefit of instant diversification and tax efficiency.

S&P 500 ETFs

Over the long term, well-capitalized, stable large-cap funds are a smart, balanced choice for investors. Funds tracking the broad market index could offer attractive opportunities. Such investments also provide investors with essential diversification and help reduce concentration risk in specific sectors.

Investors can consider Vanguard S&P 500 ETF VOO, SPDR S&P 500 ETF Trust SPY, iShares Core S&P 500 ETF IVV and State Street SPDR Portfolio S&P 500 ETF SPYM.

Total Stock Market ETFs

Vanguard Total Stock Market ETF VTI, iShares Core S&P Total U.S. Stock Market ETF ITOT and Schwab U.S. Broad Market ETF SCHB can be considered.

Value ETFs and Value Investing

Value investing focuses on purchasing stocks that are undervalued, based on some fundamental analysis, relative to their intrinsic value. Value investors actively seek out stocks currently overlooked by the market and aim to profit by purchasing them at a discount compared to their intrinsic value. Investors can also take up value investing through ETFs.

Such ETFs focus on stocks characterized by strong fundamentals and robust financial health, which trade below their intrinsic value, representing undervaluation. They offer the potential for higher, more stable returns and lower volatility than growth and blend stocks.

Vanguard Value ETFVTV, iShares Russell 1000 Value ETF IWD and iShares S&P 500 Value ETF IVE could be appealing options.

Growth ETFs

Investors can also explore growth ETFs without the constraint of a low beta, taking on more risk to potentially benefit from a positive economic outlook. Growth funds typically excel during market uptrends, providing exposure to stocks with high growth potential.

Investors can consider Vanguard Growth ETF VUG, iShares Russell 1000 Growth ETF IWF and iShares S&P 500 Growth ETF IVW.

A Mix of Value and Growth Funds

Increasing exposure to both value and growth ETFs can provide a well-balanced mix for investors. This combination offers dual benefits — value ETFs can help cushion portfolios during market pullbacks, while growth ETFs allow investors to capitalize on strong upward market trends. Together, they create a more diversified and resilient investment strategy, capturing the best of both funds.

This article originally published on Zacks Investment Research (zacks.com).

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