The Three ETFs Every Investor Should Own to Retire a Millionaire

In the pursuit of financial independence, few tools rival the power of low-cost, diversified exchange-traded funds (ETFs) when paired with disciplined, long-term investing. The U.S. stock market has historically delivered robust returns, and three ETFs-Vanguard Total Stock Market ETF (VTI), Vanguard S&P 500 ETF (VOO), and Schwab U.S. Large-Cap ETF (SCHX)-stand out as pillars of a compounding-driven retirement strategy. Their combination of low fees, broad market exposure, and consistent performance makes them ideal for investors aiming to build a $1 million portfolio over decades.

The Case for Low-Cost Diversification

The foundation of any successful long-term investment strategy lies in minimizing costs while maximizing diversification. VTI, VOO, and SCHX all charge an expense ratio of 0.03%, making them among the most cost-effective options for U.S. equity exposure according to financial analysis. However, their diversification profiles differ. VTI tracks the entire U.S. stock market, including large-, mid-, and small-cap stocks, offering the broadest exposure. VOO, by contrast, focuses on the S&P 500, which consists of 500 large-cap companies. SCHX bridges the gap, holding the largest 750 U.S. firms, thus balancing diversification with a focus on large-cap stability.

Historical performance from 2010 to 2025 underscores their shared strength. VTI delivered a total return of 680.65% (14.40% annualized), while VOO outperformed slightly with 719.61% (14.76% annualized). SCHX followed closely at 707.96% (14.66% annualized) according to total real returns data. These returns reflect the resilience of U.S. equities during a period marked by technological innovation, demographic shifts, and macroeconomic volatility.

Compounding: The Investor's Secret Weapon

The magic of compounding lies in its ability to transform modest, consistent contributions into life-changing wealth. Consider an investor who begins contributing $500 monthly to VTI in 2010. At an average annual return of 12.5%, this strategy would yield over $10 million by 2030 according to investment analysis. Similarly, doubling contributions every decade-say, from $500 to $1,000 in 2020 and to $2,000 in 2030-could accelerate the path to a $1 million portfolio by 2025.

The key to harnessing compounding is time. Starting early allows even small sums to grow exponentially. For instance, investing $100 monthly in VOO from age 25 to 65, assuming a 10% annual return, would result in a $1.2 million portfolio. Delaying the same strategy until age 35 would reduce the final amount by nearly 40%. This underscores the importance of consistency and patience, even during market downturns.

Risk, Volatility, and the Long Game

No investment is without risk, and these ETFs are no exception. During the 2020 market crash, all three experienced maximum drawdowns exceeding -33%. However, their high correlation means they are unlikely to serve as diversifiers within a single-asset portfolio. That said, their volatility is a feature, not a bug, for long-term investors. As Nobel laureate William Sharpe noted, "The only way to make money in the stock market is to own it for the long term." Rebalancing and staying invested through downturns are critical to weathering short-term turbulence.

Strategic Allocation and Portfolio Construction

While VTI, VOO, and SCHX are distinct, their similarities mean investors should avoid overconcentration. A balanced approach might allocate 50% to VTI for broad diversification, 30% to VOO for large-cap stability, and 20% to SCHX for its blend of size and liquidity. This mix captures growth from small-cap stocks while anchoring the portfolio in blue-chip giants.

For retirees, the glide path matters. Younger investors can afford to tilt toward VTI's broader exposure, while those nearing retirement might favor VOO's lower volatility. Regardless of age, the emphasis should remain on regular contributions and fee minimization.

Conclusion: Building a Millionaire's Portfolio

The path to a $1 million retirement portfolio is not shrouded in complexity. It requires selecting low-cost, diversified ETFs like VTI, VOO, and SCHX, committing to regular contributions, and resisting the urge to time the market. As the data shows, even modest sums can grow substantially over decades, provided investors embrace compounding and maintain discipline. In an era of rising costs and uncertain markets, these three ETFs offer a proven blueprint for financial independence.