Why These Five ETFs Are Enough
Many investors end up with too many funds. They fall into the trap of buying what’s popular and often creating unnecessary overlap and extra fees. The truth is, a well-chosen set of five ETFs can give you the same diversification as a much larger portfolio, but with less hassle and lower costs.
The idea here is to build a foundation that works whether you’re 25 or 55, whether you want aggressive long-term growth or a steady source of income from dividend ETFs. Exchange-traded funds give you the ability to own fractions of thousands of publicly traded companies with a single purchase, and the right five funds give you complete market coverage at low cost.
If you’re new to ETFs or just want to simplify your approach, learning how to invest in ETFs can help you understand the basics of passive investments. The strategy here is simple though: pick the best ETFs that complement each other, avoid expensive overlaps, and let compound growth do the heavy lifting. Unlike active management approaches that try to buy stock based on predictions, these index fund options give you broad exposure to multiple assets across sectors and geographies.
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ETF Basics
Exchange-traded funds trade on major exchanges like stocks, giving investors exposure to diversified portfolios of companies without having to buy individual positions. The best ETFs to invest in typically track an index, they also charge a minimal expense ratio, and hold hundreds or thousands of holdings to spread your risk across the market.
Why Index Funds Beat Active Management
Over time, most actively managed mutual funds do not outperform their benchmarks. Here is something you want to weigh carefully: The expense ratio on active management typically runs 10 to 20 times higher than passive investments like index funds, and that cost drag compounds into significant money over decades. If you are a long-term investor focused on building wealth through the stock market, low cost index funds give you broad exposure to growth without paying fund managers to make bets that rarely pan out. This is a practical, sensible choice.
While real estate, commodities, and bonds can help diversify a portfolio, most investors will benefit from making equity ETFs the core of their investments. These 5 ETFs are easy to buy and sell through any brokerage account and offer the liquidity and flexibility most people need.
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Your Core Foundation: Two ETFs
Start with the basics. These two funds cover the entire US stock market and could honestly work well as a standalone portfolio for most long-term investors.
Vanguard Total Stock Market ETF (VTI)
Vanguard Total Stock Market ETF tracks every publicly traded company in the US across large-cap stocks, mid-caps, and small-caps. With $575 billion in total assets and 3,512 holdings, VTI provides exposure to the complete domestic market in a single fund.1
The expense ratio is just 0.03%, meaning you pay $3 annually for every $10,000 you invest. Over the past year, this index fund returned 15.44%, and its 10-year average comes in at 15.11% annually. These are attractive returns that beat most mutual fund alternatives.
Here’s what makes VTI stand out among the best ETFs: it’s essentially the S&P 500 plus everything else. In fact, VOO vs. VTI shows an 88% overlap between the two funds, with VTI adding exposure to mid and small-cap companies that VOO excludes. If you want total market coverage without buying multiple funds, VTI delivers broad exposure across all sectors and market capitalizations. And if you’re comparing S&P 500 options specifically, check out our VOO ETF review for a more in-depth look at how the index works.
For long-term investors, VTI serves as the core holding, the foundation everything else builds on. This index fund provides instant diversification across specific industries from tech sector giants to healthcare, financials, and consumer goods.
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Schwab US Large-Cap Growth ETF (SCHG)
SCHG invests in large-cap stocks with a focus on growth. It holds fewer companies than VTI, but that means it leans toward businesses that put profits back into expansion instead of paying out dividends.2
The expense ratio matches is 0.04%, another great example of low cost ETF investing at its finest. Performance speaks for itself: SCHG returned 12.92% over the past year and has averaged 18.81% annually over the past decade, outpacing the S&P 500 by a meaningful margin.
The low dividends and high potential in qualified dividends also make SCHG a very tax-efficient ETF to build wealth long term.
Technology makes up nearly half the fund’s holdings, but SCHG isn’t a pure tech sector play. You’ll find growth stocks across sectors, from financials to healthcare. If you’re comparing growth options among the most popular ETFs, SCHG vs VUG vs QQQM breaks down the key differences. QQQ and VUG are both solid alternatives, and our QQQ vs QQQM comparison can help if you’re leaning toward Nasdaq-focused funds.
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The Momentum Edge. Top Performers
Momentum investing sounds complicated, but it’s really not. These funds buy stocks that are already winning, and if we look at past performance data, it shows they keep winning.
Invesco S&P 500 Momentum ETF (SPMO)
SPMO invests in 100 of the S&P 500 companies with the highest momentum, meaning those with strong recent performance after accounting for volatility. The fund updates its holdings twice a year to keep the strongest stocks and remove those that have lost momentum.
With $13 billion in total assets and a 0.13% expense ratio, SPMO costs slightly more than core index funds but delivers results that justify the fee. Over the past year, SPMO returned 20.72%. This is significantly ahead of the S&P 500 average. The 10-year average sits at 18.53%, making it one of the top-performing ETFs in the market.3
Even a small difference in annual returns can add up over time. For example, a $10,000 investment growing at 18.5% instead of 15.5% would be worth about $30,000 more after 20 years. This is why understanding how momentum funds like SPMO work can make a real difference. For a closer look at why this fund works, read our full breakdown on SPMO: the momentum ETF most investors miss.
Past Performance: Why Momentum Works
While past performance doesn’t guarantee future results, momentum strategies have delivered attractive returns across decades of market history. These funds work because stocks that outperform tend to continue outperforming in the near term, allowing investors to capture gains without trying to predict which companies will lead next year’s market.
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International ETFs: Global Momentum Strategy
International exposure typically drags down returns when you buy broad international index funds. IDMO solves that problem by filtering out the losers and focusing only on international stocks with momentum.
The Invesco S&P International Developed Momentum ETF holds 182 stocks from developed markets outside the US, with $3 billion in net assets and a 0.25% expense ratio. Over the past year, IDMO crushed expectations with a 42.14% return. The 10-year average of 12.01% trails US momentum but still beats most broad international ETFs.4
International Exposure: Tax Considerations
Here’s the catch with international exposure: IDMO pays a higher dividend yield (around 3.59%) with a lower percentage of qualified dividends. That makes it less tax-efficient than US-focused funds. The IRS taxes qualified dividends at lower capital gains rates, but when dividends don’t qualify, they’re taxed as ordinary income.5 For that reason, IDMO works best in tax-advantaged IRA accounts where dividends grow tax-deferred or tax-free.
If you want international exposure without settling for mediocre returns, IDMO delivers momentum-driven performance in markets most investors ignore. This approach provides diversification benefits while maintaining the growth focus that long-term investors need.
| ETF Name | Vanguard Total Stock Market ETF (VTI) | Schwab U.S. Large Cap Growth ETF (SCHG) | Invesco S&P 500 Momentum ETF (SPMO) | Invesco S&P International Developed Momentum ETF (IDMO) | Schwab U.S. Dividend Equity ETF (SCHD) |
| Underlying Index | CRSP US Total Market Index | Dow Jones U.S. Large-Cap Growth Total Stock Market Index | S&P 500 Momentum Index | S&P World Ex-U.S. Momentum Index | Dow Jones U.S. Dividend 100™ Index |
| Inception Date | 5/24/2001 | 12/11/2009 | 10/09/2015 | 02/24/2012 | 10/20/2011 |
| Net Assets | $575B | $52B | $13B | $3B | $76B |
| Expense Ratio | 0.03% | 0.04% | 0.13% | 0.25% | 0.06% |
| Holdings | 3,512 | 198 | 100 | 182 | 102 |
| Top Ten Holdings % | 34.53% | 58.00% | 50.84% | 27.13% | 40.63% |
| Dividend Yield (TTM) | 1.10% | 0.36% | 0.74% | 3.59% | 3.60% |
| Qualified Dividends (%) | 93.58% (2025) | 99.99% (2024) | 100% (2025) | 28.8% (2025) | 100% (2024) |
| Dividend Frequency | Quarterly | Quarterly | Quarterly | Quarterly | Quarterly |
| Past Year (As of 1/31/2026) | 15.44% | 12.92% | 20.72% | 42.14% | 11.34% |
| Past 5 Year Avg. | 13.52% | 15.49% | 19.03% | 14.14% | 10.93% |
| Past 10 Years Avg. | 15.11% | 18.81% | 18.53% | 12.01% | 12.73% |
| S&P 500 Overlap by Weight | 88% | 54% | 30% | 0% | 7% |
Dividend ETFs. The Income Anchor
Growth stocks get the attention, but dividend equity ETF options matter too, especially when markets turn volatile. Dividend ETFs provide income while you wait for long-term growth.
Schwab US Dividend Equity ETF (SCHD)
SCHD tracks the Dow Jones US Dividend 100 Index, which selects companies with strong fundamentals and consistent dividend growth. With $76 billion in net assets, 102 holdings, and a 0.06% expense ratio, it’s one of the largest and cheapest dividend equity ETF options available.6
The fund returned 11.34% over the past year and has averaged 12.73% annually over the past decade. This is a solid performance that comes with a healthy 3.60% dividend yield. That income provides cushion during downturns, and gives you cash flow if you’re approaching retirement.
What makes SCHD especially useful among dividend ETFs is its low overlap with the S&P 500—just 7%. If you already own VTI or SCHG, you’re not just repackaging the same stocks with SCHD. The fund focuses on sectors like energy, consumer staples, and healthcare that traditional growth funds underweight.
If you want a fund that pays you while you wait for growth, SCHD fits the bill. It won’t double in a year, but it softens volatility and delivers reliable income without sacrificing long-term returns. This dividend equity ETF strategy works particularly well for investors who need current income or want to reduce overall portfolio risk.
Dividends And Long-Term Returns
Dividends play a big role in long-term stock market returns. Reinvesting dividends compounds growth over time, and dividend-paying companies tend to exhibit more stability during market downturns. For long-term investors, dividend ETFs like SCHD provide both income and growth potential.
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How the Five ETFs Work Together
These five funds complement each other without creating expensive redundancy. VTI covers the entire US market. SCHG tilts toward growth stocks in the tech sector and beyond. SPMO captures momentum in large-cap stocks. IDMO adds international exposure with a performance filter. SCHD provides income and stability through dividends.
Broad Exposure Without Overlap
The beauty of this setup is flexibility. If you’re young and want maximum long-term growth, you can weigh heavily toward VTI, SCHG, and SPMO. If you’re nearing retirement and want income with less risk, you shift toward VTI and SCHD with smaller allocations to momentum. The funds work together regardless of your goals, providing broad exposure to multiple assets and sectors.
You are not tied to one allocation forever. This portfolio acts as a toolkit you can adjust as your needs change. With low expense ratios across all five funds, more of your money stays invested and working for you.
Buy Stock Through A Brokerage Account
If you’re ready to buy these ETFs, most brokerage accounts let you purchase these top ETFs commission-free. You can start with as little as the price of one share and build from there. Unlike trying to buy individual stocks across hundreds of companies, these exchange-traded funds allow you to build a diversified portfolio with just five positions.
Portfolio Builds for Different Goals
Long-term investors have different needs depending on their stage of life and risk tolerance. These five funds work for both growth and income strategies.
Expense Ratio: Keeping Costs Low
Every dollar you pay in fees is a dollar that can’t compound over decades of investing. The expense ratio on these five funds ranges from 0.03% to 0.25%, far below the typical mutual fund expense ratio of 0.50% to 1.00%. Over 30 years, that difference in fees can mean tens of thousands of dollars in your account instead of paid to fund companies.
Long-Term Investors: Tax Efficiency Matters
Tax efficiency matters too. VTI, SCHG, and SPMO work great in taxable brokerage accounts because they generate minimal taxable distributions. IDMO and SCHD make more sense in IRA accounts where dividends grow tax-deferred or tax-free. Placing the right funds in the right account types can save you thousands over time, allowing more money to compound for long-term growth.
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Best ETFs for Long-Term Growth
Five ETFs. That’s it. No need to chase the latest trends, buy 15 overlapping funds, or pay active management fees for strategies that rarely beat these top performing ETFs.
Getting Started Buying ETFs
If you want more in-depth research tools to analyze these funds, platforms like Seeking Alpha offer detailed breakdowns and analyst ratings that go beyond what you’ll find on fund company websites. These tools help you understand holdings, sectors, performance, and risk before you invest.
The key? Stop overcomplicating this! Five exchange-traded funds. Low expense ratios. Broad exposure across the stock market. Build it once and let compound growth work for decades. These top ETFs we have covered provide the foundation for long-term wealth without the stress of active management or the cost of expensive mutual funds.
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