Most investors assume building a solid portfolio requires a long list of funds, picking individual stocks, and constant monitoring. But with just three exchange traded funds (ETFs), you can have instant exposure to the majority of the world’s publicly traded companies across the U.S. stock market, international markets, and the bond market, all in one low-cost setup.
These three ETFs are among the most popular ETFs available, and each one holds hundreds to thousands of individual stocks or bonds in a single purchase. For long term investors who want broad exposure to multiple assets across different asset classes without the hassle of frequent trading, a portfolio like this is about as simple as it gets.
If you want a full breakdown of how to build this portfolio from scratch, grab the free 3-Fund Portfolio Guide here. Otherwise, here’s how each fund works.
VTI: Best ETFs to Invest In for U.S. Stock Exposure
The first ETF in this portfolio is the Vanguard Total Stock Market ETF, ticker VTI. This fund tracks the CRSP U.S. Total Market Index, giving investors exposure to large, mid, small, and micro-cap U.S. stocks across the entire U.S. stock market. When you buy VTI, you’re effectively buying a small piece of the U.S. economy.1
Exchange Traded Funds: VTI at a Glance
VTI officially launched in May 2001 and currently holds 3,511 stocks. The top ten holdings include names you’ve probably heard of, like Nvidia, Apple, and Microsoft, with each making up roughly 5 to nearly 7% of the fund. Combined, those top ten holdings account for about 34.5% of total assets, and technology is the largest sector at close to 31% of the fund’s weight.
| Metric (as of 2/9/26) | VTI |
| Index Tracked | CRSP U.S. Total Market Index |
| Total Holdings | 3,511 |
| Expense Ratio | 0.03% |
| Dividend Yield (TTM) | 1.12% |
| Assets Under Management | ~$585B (#4) |
| Inception Date | May 2001 |
| Top 10 Holdings Weight | ~34.5% |
Expense Ratio and Cost
The expense ratio for VTI is a mere 0.03%, which works out to just $3 per year for every $10,000 invested, how is that for a bargain?! That cost is automatically deducted from the fund’s value over time, so you don’t have to pay anything out of pocket.
For long term investors looking to keep low expense ratios at the core of their strategy, this is one of the most low cost ETF options for broad stock market investing. That low cost advantage compounds significantly over time compared to actively managed funds that charge a lot more.
Dividends and Tax Efficiency
The dividend yield over the past twelve months came to 1.12%, paid out on a quarterly basis. Of those dividends, close to 94% have the potential to be considered qualified dividends, meaning they’d be taxed at the more favorable long-term capital gains rate of 0%, 15%, or 20% depending on income.2 To qualify for that favorable tax treatment, the investment must be held for at least 61 days during the 121-day window that begins 60 days before the ex-dividend date.
This is a meaningful tax advantage. Unlike many dividend equity ETF options that generate mostly non-qualified income, VTI’s structure makes it a naturally tax-efficient index fund for taxable accounts.
Long Term ETF Performance
VTI has delivered attractive returns for long term investors. Over the past year it’s grown 17.14%, the three-year average sits at 22.25%, the five-year average is roughly 13%, and the ten-year average annual return is 13.07%. To put that in perspective, a $100,000 investment with $500 added every month since the start of 2016 would have grown to roughly $459,000 today.
That kind of result is why VTI consistently ranks among the best long term ETFs for buy-and-hold investing. Compared to picking individual stocks, a broad index fund like VTI spreads investments across thousands of stocks in a single low cost ETF, which significantly reduces concentration risk. For investors building a long term portfolio, it’s one of the most efficient ETF investments available.
VTI has an 88% overlap with the S&P 500, and over a fifteen-year period the correlation between the two is essentially 1. Since 1957, the S&P 500 has averaged just over 10% per year, giving long term investors plenty of historical data to feel confident about the growth potential of a fund like this built around U.S. stocks.
Deciding between VTI and VOO? See: VOO vs VTI: Which Vanguard ETF Should You Choose?
VXUS: International ETFs for Global Diversification
The second fund you need to consider is the Vanguard Total International Stock ETF, ticker VXUS. This one tracks the FTSE Global All Cap ex-U.S. Index, allowing investors to gain diversified exposure to developed and emerging markets outside the United States.3 Where VTI covers U.S. stocks, VXUS covers everywhere else.
Emerging Markets and International Diversification
VXUS launched in January 2011 and currently holds 8,691 stocks. The top ten holdings, which include Taiwan Semiconductor, Tencent, and ASML, make up only about 11.3% of the entire fund.
That’s a significant portion less concentrated than VTI’s top ten at 34.5%, showing just how spread out the international exposure really is. Financials is the largest sector at roughly 21.3%, and the top country allocations are Japan at 15%, the United Kingdom at 9%, China at 8.6%, and Canada at 8.1%.
| Metric (as of 2/9/26) | VXUS |
| Index Tracked | FTSE Global All Cap ex-U.S. |
| Total Holdings | 8,691 |
| Expense Ratio | 0.05% |
| Dividend Yield (TTM) | 2.91% |
| Assets Under Management | ~$133B |
| Inception Date | January 2011 |
| Top 10 Holdings Weight | ~11.3% |
» Want to see more data? Compare top index funds through our free cheatsheet
Low Expense Ratios and Currency Risk
The expense ratio on VXUS is 0.05%, still solidly in the low cost ETF range. The dividend yield over the past twelve months came in around 2.91%, noticeably higher than VTI. However, only about 58.5% of those dividends have the potential to be qualified, making VXUS less tax efficient than its U.S. counterpart.
One thing to keep in mind: currency risk is a real factor with VXUS. Exchange rate fluctuations can affect returns in ways that U.S.-only investments don’t face.
For this reason, many investors prefer to hold VXUS inside a tax-advantaged account like a Roth IRA, and it generally makes sense to keep the allocation smaller relative to U.S. equities. Many larger funds focused purely on U.S. markets still get some indirect global coverage through the overseas revenues of top U.S. companies.
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Direct Exposure to International Performance
VXUS has actually had a strong recent run, gaining 32.23% over the past year. The three-year average is around 17%, the five-year average sits near 8%, and the ten-year average is approximately 8.55%. The fund has zero overlap with the S&P 500, but the correlation to U.S. stocks is around 0.84, so they do tend to move in the same general direction.
For investors building long term exposure to global markets, VXUS is a reliable ETF for access to international stocks at a low cost. It’s one of the top ETF picks for international exposure, and pairing it with a U.S. ETF like VTI covers the full global market.
For a more in-depth look at International ETF options: Best International ETFs to Own in 2026
BND: The Aggregate Bond ETF For Stability
The third fund is the Vanguard Total Bond Market ETF, ticker BND. This bond ETF provides broad exposure to the entire U.S. investment-grade bond market in a single ETF, making it one of the most widely held passive investments for reducing portfolio volatility.4 Unlike growth-oriented ETF investments in stocks, BND is built for stability.
What Is the Bond Market ETF?
BND tracks the Bloomberg U.S. Aggregate Float Adjusted Index. It launched in April 2007 and currently holds approximately 11,429 securities. The top ten holdings make up only about 4% of the fund, and U.S. Treasury and agency securities account for roughly half of the total.
There is no active fund manager making stock-picking calls here; the index does the work, keeping this ETF among the best long term ETFs for low-cost, passive bond market investing. The expense ratio is 0.03%, matching VTI for one of the lowest available.
| Metric (as of 2/9/26) | BND |
| Index Tracked | Bloomberg U.S. Aggregate Float Adjusted |
| Total Holdings | 11,429 |
| Expense Ratio | 0.03% |
| Dividend Yield (TTM) | 3.83% |
| Assets Under Management | ~$151B |
| Inception Date | April 2007 |
| Distribution Frequency | Monthly |
Bond ETF: Income And Tax Considerations
BND pays out income monthly. But because the income comes from interest payments rather than corporate dividends, this bond ETF generally does not produce qualified dividends. The income is taxed as ordinary income, which is less favorable for taxable account investing.
One partial offset: a portion of the income comes from U.S. Treasuries, which are typically exempt from state income taxes. Given this, BND works better inside tax-advantaged investment accounts like a 401(k) or IRA than in a taxable account.
It’s a passive investment built for stability, not for growing wealth aggressively through stocks or other equity investments. For investors still deciding how much to allocate, that investment decision often comes down to how many years you have left until retirement.
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Bond Market Performance
Over the past year, BND has returned approximately 7.5%. The three-year average is around 4.9%, the five-year average is slightly negative at around -0.5%, and the ten-year average annual return is approximately 1.84%. The fund has no overlap with the S&P 500 and a correlation of only 0.32, making it a genuine diversifier within a portfolio of stocks and other investments.
Keep in mind that those returns assume reinvestment of income. If you were pulling the monthly income out rather than reinvesting it, the actual appreciation of the fund’s value over the past decade has been close to flat. That’s exactly why BND works best as a stabilizer. For investors who are still many years from retirement and focused on building wealth, heavy bond investing will typically cost you growth.
Best Long Term ETFs: Portfolio Examples
These three funds make up what many refer to as the Bogleheads 3-fund portfolio, a widely followed approach to low-cost ETF investing. The investment objective is simple: maximum diversification across stocks, bonds, and international investments at minimum cost.
They consistently rank among the top ETFs for passive investors who want long term market exposure without the complexity of managing many ETFs.
Here’s how four different ETF allocations would have performed historically from January 2017 to January 2026.
Portfolio Comparison (Jan 2017 to Jan 2026)
| Portfolio | Allocation | Avg Annual Return | Std Dev | Best Year | Worst Year |
| Conservative | 60% BND / 32% VTI / 8% VXUS | ~6.7% | ~8% | +16% | -15% |
| Moderate | 50% VTI / 30% BND / 20% VXUS | ~10% | ~11.5% | +22.34% | -16.91% |
| Aggressive | 65% VTI / 15% VXUS / 20% BND | ~11% | ~13% | +25% | -18% |
| Buffett 2-Fund | 90% VOO / 10% VGSH | ~13.9% | Just below S&P 500 | +28% | -17% |
For reference, the S&P 500 averaged roughly 15% annually over that same period.
The conservative portfolio delivered the lowest volatility, with a standard deviation of only 8%. But the tradeoff was significant, with returns lagging the broader market by a wide margin. The aggressive portfolio pushed past 11% per year, but still trailed a basic S&P 500 index fund. And Warren Buffett’s two-fund approach, 90% S&P 500 and 10% short-term government bonds, averaged 13.88% annually, turning $10,000 into roughly $32,500.5
If you want to go even simpler, see: The Warren Buffett 2-Fund Portfolio
Best ETFs for Long Term Growth
The biggest factor in choosing an ETF allocation comes down to time horizon and risk tolerance. If you have ten to fifteen or more years before you need to touch the funds, a growth-heavy allocation in long term ETFs has historically rewarded patient investors significantly.
For most people in their 20s, 30s, and 40s, the priority is growth. VTI and VXUS do the heavy lifting there, giving you diversified exposure to U.S. stocks and international stocks at very low expense ratios. BND can play a role in managing volatility, but the more you allocate to bonds, the bigger the tradeoff gets for long term growth.
If you’re at or near retirement, the balance shifts toward stability and income. The key point: past performance is not a guarantee of future performance, but staying invested in broad, low cost ETFs over the long term has consistently rewarded those who stuck with it and kept investing.
All three ETF options are available on nearly every major brokerage platform, and most allow automatic investments on any schedule you choose. Set it up, automate it, and stay the course.
Ready to start investing? See the top brokerage accounts here to find the right platform, or grab our free Index Fund Cheatsheet for a quick reference on the best funds available.
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