Patience Pays: ETFs You Can Buy and Hold for the Long Run

Volatility has emerged as a consistent theme so far this year, keeping the S&P 500 under pressure. The broad market index has fallen 1.42% over the past five days and 4.33% over the past month. The S&P 500 has fallen about 2.99% so far this year.

The ongoing conflict in the Middle East, which has pushed oil prices higher and raised expectations of energy-driven inflation, coupled with markets anticipating a delay in Fed rate cuts, is likely to keep investors cautious in the near term.

This caution is reflected in recent market volatility, as highlighted by the CBOE Volatility Index. The index has gained about 22.03% over the past five days and surged around 90.64% since the start of the year.

Amid the current market conditions, a buy-and-hold strategy offers investors a path to resilient portfolio growth.

What Should Be the Strategy for this Scenario?

Buy-and-hold is a classic investment strategy that offers a passive approach, ideal for investors seeking sustainable, long-term returns. By staying invested through both bull and bear markets, buy-and-hold investors allow their portfolios and investments to grow and compound over time, without being swayed by short-term market fluctuations.

This strategy is particularly effective for building wealth and managing risk, appealing to long-term investors who prefer a hands-off approach and are less concerned with short-term market volatility. For new investors, buy-and-hold can be especially prudent, helping reduce exposure to market swings while fostering disciplined investing habits.

A key benefit of buy-and-hold is its ability to minimize the influence of investor emotions on investment decisions. By removing impulsive behavior, such as panic selling during downturns or overbuying in rallies, investors can avoid actions that could harm their portfolios. This makes buy-and-hold a relevant and resilient strategy, especially in today’s uncertain economic environment.

Why Buy-and-Hold Becomes the Go-To Strategy

Given the current fragile and complex geopolitical landscape, near-term easing of tensions and reduced market volatility are unlikely, making it difficult to predict how the global economy will respond. As a result, investors are likely to become more risk-averse, gravitating toward stable strategies such as buy-and-hold.

With the possibility that the conflict could persist, prolonged tensions may further disrupt energy supplies, heightening concerns of a potential global economic slowdown.

Volatility is expected to remain high, particularly given the potential for further geopolitical tensions influenced by President Trump’s foreign policy. As quoted on CNBC, President Trump indicated that after the current military actions in Iran are finished, his administration may turn its attention to Cuba.

These geopolitical tensions have overshadowed other concerns, including trade tensions and potential disruptions from AI, which remain relevant but have taken a backseat. In such an environment, adopting a long-term passive investment strategy becomes the go-to approach for investors to weather short-term market storms. Riding out volatility with a buy-and-hold strategy removes the challenges of timing the market.

ETFs to Buy and Hold

Using ETFs to implement the strategy gives the additional benefit of instant diversification and tax efficiency. Below, we have highlighted a few ETFs that investors can buy and hold.

Investors seeking to build a more balanced and diversified portfolio should consider funds that track major indexes, such as the S&P 500 or broad market funds that cover nearly the entire U.S. market.

S&P 500 ETFs

Investors can consider Vanguard S&P 500 ETF (VOO), the SPDR S&P 500 ETF Trust (SPY and iShares Core S&P 500 ETF (IVV), which track the S&P 500. All three funds areamong the largest in the United States, with IVV and VOO charging an annual fee of 0.03%.

Investors can also consider equal-weight ETFs for a more diversified exposure. Investors seeking diversified exposure across sectors within the U.S. market can also consider Invesco S&P 500 Equal Weight ETF RSP, ALPS Equal Sector Weight ETF EQL and Invesco S&P 100 Equal Weight ETF EQWL.

These funds offer sector-level diversification by assigning equal weight to each constituent stock, regardless of market capitalization, reducing concentration risk. This makes them a relevant choice for investors seeking diversified exposure across sectors within the domestic market.

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

Investors can leverage value investing, a strategy particularly compelling in today’s economic environment. Value investing focuses on purchasing stocks that are undervalued, based on some fundamental analysis, relative to their intrinsic value. By purchasing and holding these undervalued stocks for the long term, value investors rely on the expectation that the market will eventually recognize their true value, allowing them to reap significant rewards.

Value investing through ETFs offers investors an easy and accessible way to follow this strategy. Value ETFs may present an appealing alternative, simplifying the implementation of the strategy for investors. Additionally, value ETFs can serve as a source of income through dividends.

Investors can consider Vanguard Value ETF VTV, Avantis U.S. Large Cap Value ETF AVLV, iShares Russell Mid-Cap Value ETF IWS and Vanguard Small Cap Value ETF VBR.

Boost Your Portfolio with Our Top ETF Insights

Zacks' exclusive Fund Newsletter delivers actionable information, top news and analysis, as well as top-performing ETFs, straight to your inbox every week.

Don’t miss out on this valuable resource. It’s free!

Get it now >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

State Street SPDR S&P 500 ETF Trust (SPY): ETF Research Reports

Vanguard Total Stock Market Index Fund ETF Shares (VTI): ETF Research Reports

Vanguard 500 Index Fund ETF Shares (VOO): ETF Research Reports

Vanguard Value Index Fund ETF Shares (VTV): ETF Research Reports

Invesco S&P 500 Equal Weight ETF (RSP): ETF Research Reports

Vanguard Small-Cap Value Index Fund ETF Shares (VBR): ETF Research Reports

iShares Core S&P 500 ETF (IVV): ETF Research Reports

Invesco S&P 100 Equal Weight ETF (EQWL): ETF Research Reports

iShares Russell Mid-Cap Value ETF (IWS): ETF Research Reports

Schwab U.S. Broad Market ETF (SCHB): ETF Research Reports

iShares Core S&P Total U.S. Stock Market ETF (ITOT): ETF Research Reports

ALPS Equal Sector Weight ETF (EQL): ETF Research Reports

Avantis U.S. Large Cap Value ETF (AVLV): ETF Research Reports

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

Zacks Investment Research