Set It and Forget It: Top ETFs to Buy and Hold Like Buffett

Key Points

• Recent turbulence highlights the appeal of a "set it and forget it" investment approach, focusing on stability and long-term growth.
• Buffett advocates investing in the S&P 500 index fund as the best strategy for most people, reinforcing the value of ETFs like SPY and VOO for long-term, hands-off investing.
• High-quality ETFs like SPY, VOO, and QQQ offer a hands-off investment option, providing diversification and reducing the need for active portfolio management.

In times of market volatility and turbulence, like we've seen in the past few weeks, the "set it and forget it" investment approach becomes especially appealing and relevant. Various factors, including jobless claims, geopolitical uncertainties, shifts in central bank policies, and the infamous carry trade, have influenced recent market pullbacks. 

For investors seeking stability and long-term growth without the need for active portfolio management, investing in high-quality ETFs is a straightforward and solid strategy. It eliminates the need to constantly monitor macro-driven headlines, making it a hands-off investment option.

If picking individual stocks isn't your forte, you're in good company. Even Warren Buffett, the Oracle of Omaha, has long advocated for investing in the S&P 500 index fund as the best bet for most people. As he said at Berkshire's 2020 annual meeting, "In my view, for most people, the best thing to do is own the S&P 500 index fund." Taking a page from the playbook of one of the greatest investors of all time, let's dive into three popular ETFs ideal for everyday investors.

The SPDR S&P 500 ETF Trust

The SPDR S&P 500 ETF Trust NYSEARCA: SPY is a globally recognized and widely traded ETF that provides investors with broad exposure to the U.S. equity market by tracking the S&P 500 index. The ETF is dominated by the 'Magnificent 7,' with Apple as its top holding at 6.87%, followed closely by Microsoft, NVIDIA, Amazon, Meta, Alphabet, and Berkshire Hathaway.

While tech giants lead the portfolio, SPY also offers substantial diversification beyond the technology sector, with 13% exposure to financials, 9.7% to consumer discretionary, and 12.1% to healthcare. Investors also benefit from a 1.28% dividend yield, making SPY a well-rounded choice for those seeking a mix of growth and income.

The Vanguard S&P 500 ETF

Similarly, the Vanguard S&P 500 ETF NYSE: VOO offers exposure to the same top holdings and sector distribution as SPY, including substantial investments in Apple, Microsoft, and other leading companies. However, VOO stands out with a slightly lower dividend yield of 1.21%, which may be less attractive to income-focused investors. The natural appeal of VOO lies in its ultra-low expense ratio of just 0.03%, making it one of the most cost-effective ways to invest in the S&P 500.

It's important to note that VOO has significantly lower liquidity than SPY, with an average daily trading volume of just 5.19 million shares compared to SPY's 64 million. This lower liquidity might be a consideration for more active traders but is typically not a concern for long-term, buy-and-hold investors.

The Invesco QQQ Trust 

The Invesco QQQ Trust NASDAQ: QQQ is an excellent choice for those looking for more concentrated exposure to the technology sector. QQQ tracks the Nasdaq-100 Index, heavily weighted towards technology, comprising 51.4% of the ETF's sector exposure. Within this, the ETF focuses on semiconductors and semiconductor equipment (22.3%), software (15.9%), media (11.7%), and communications equipment (10.5%). This makes QQQ particularly appealing to investors who believe in the continued dominance of tech in the modern economy.

Moreover, holdings in QQQ have an aggregate rating of Moderate Buy, based on 1,165 analyst ratings issued over the past year, covering 50 companies that account for 86.4% of the portfolio. This combination of sector focus and analyst confidence makes QQQ a compelling option for growth-oriented investors.

The Bottom Line

For conservative investors who prefer a "set it and forget it" approach, these three ETFs, SPY, VOO, and QQQ, offer reliable options for long-term growth. Each provides exposure to different slices of the market, with varying degrees of cost, liquidity, and risk. By choosing one or a combination of these ETFs, investors might opt to build a diversified portfolio that can weather market volatility and capitalize on long-term trends.