Want $1 Million in Retirement? 3 Simple Index Funds to Buy and Hold for Decades.

Contrary to a common assumption, the average investor's path to a seven-figure retirement nest egg isn't paved with lots of aggressive trading activity. Quite the opposite, actually. In most cases, less is more, meaning a more passive buy-and-hold approach is likely to yield the strongest net returns. The key is simply resisting the temptation to chase hot stocks higher and sticking with the more proven plan instead.

With that as the backdrop, here's a closer look at three simple index-based exchange-traded funds (ETFs) that millionaire-minded investors can buy today and hold on to indefinitely. The ETF's managers themselves will handle any of the minimal changes needed to their underlying portfolios.

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1. SPDR S&P 500 ETF Trust

Don't worry -- the other two exchange-traded funds being discussed in this article are a little less obvious than an investment in the broad market's best-known barometer. As a starting point, though, nearly all investors will want to build their portfolio's foundation with the SPDR S&P 500 ETF Trust (NYSEMKT: SPY).

This ETF, of course, mirrors the performance of the S&P 500 (SNPINDEX: ^GSPC), which reflects about 80% of the entire U.S. stock market's total value; it is arguably the best and easiest way to invest in "the market," which boasts a pretty reliable average annual long-term return of right around 10%.

And statistically speaking, this fund may also be the smartest, highest-odds way of betting on at least the large-cap sliver of the stock market. As recent data from Standard & Poor's reminds us, the mutual fund industry doesn't have a particularly great performance track record. Over the course of the past year, nearly 73% of large-cap funds available to U.S. investors have lagged the performance of the S&P 500, while for the past five years, the figure is ratcheted up to 87%.

For the past 14 years, more than 88% of large-cap funds have underperformed their benchmark. It's a testament to just how difficult it is to beat the market by buying stocks everyone else already knows a great deal about. So, instead of trying to beat the crowd, your best bet may well be to simply join it.

If you're a fan of the Vanguard family of funds (or an existing Vanguard customer), by the way, the Vanguard S&P 500 ETF (NYSEMKT: VOO) would work just as well.

2. The Technology Select Sector SPDR Fund

Every sector falls in and out of favor over time, impacting its relative performance. Indeed, tech stocks arguably run more hot and cold than any other grouping.

There's still no denying, however, that technology stocks as a whole have dished out more net long-term gains over the course of the past three decades than any other sector. And for good reason. After all, the sociocultural changes these outfits are driving (like the advent of the internet, smartphones, and most recently, artificial intelligence) are just too important for this not to be the case. This isn't apt to change in the foreseeable future, either.

Ergo, a multidecade stake in the Technology Select Sector SPDR Fund (NYSEMKT: XLK) might be one of the few worthy ways of trying to beat the broad market.

But why not the Invesco QQQ Trust (NASDAQ: QQQ), which has clearly been an amazing performer of late thanks to the ongoing AI revolution?

It's not a bad way to plug into the tech sector either, although there is one arguable stumbling block with the QQQ that doesn't apply to State Street's Technology Select Sector SPDR Fund. That is, the Invesco fund only holds Nasdaq-listed names, which means it excludes a handful of NYSE-listed technology stocks that you'll also want to buy and hold. Since it holds all the S&P 500's technology names, conversely, XLX also holds stocks like IBM, Salesforce, and ServiceNow.

It may not matter much in the end. To the extent it does matter, though, the Technology Select Sector SPDR Fund brings a more diversified basket of tech stocks to the table.

And yes, as was the case with the S&P 500 index fund, there's a Vanguard alternative to XLX. That's the Vanguard Information Technology ETF (NYSEMKT: VGT), meant to reflect the holdings and performance of the MSCI US Investable Market Information Technology 25/50 Index.

3. Schwab U.S. Dividend Equity ETF

Finally, add the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) to your list of millionaire-making ETFs you can buy and hold for decades.

Stepping into a position in SCHD here is one part philosophy, and one part strategy. But, first things first.

Just as the name suggests, Schwab's U.S. Dividend Equity ETF is first and foremost a dividend-paying fund. It holds stakes in Coca-Cola, Chevron, Lockheed Martin, and pharmaceutical outfit Amgen, just to name a few -- all solid dividend payers even if not rock star growth names. That's the chief reason this ETF and its underlying Dow Jones U.S. Dividend 100™ Index have underperformed since late 2023. In fact, investors have been clamoring for AI-related growth stocks at the expense of almost everything else.

And that's the first philosophical argument for buying a piece of SCHD now: We may finally be on the verge of seeing a shift in the market's leadership, from growth to value stocks like Coca-Cola and Chevron. And not just for a few months. For a few years.

As for the second, strategic reason to step into the Schwab U.S. Dividend Equity ETF sooner rather than later, this fund's stocks' relatively poor performance of late has pumped its trailing divided yield up to 3.8%. You'd be hard-pressed to find better among blue chip exchange-traded funds like this one.

The only "catch" is just the time sensitivity of this metric -- the longer you wait to get in, the less likely it is you'll be able to plug your money in at this strong yield. When you're talking about a holding period of decades, even a few basis points' worth of yield can have a significant multiplier effect.

It also doesn't hurt that SCHD is distinctly different from SPY or XLK, smoothing out some of a portfolio's volatility-spurred rough edges that might otherwise make it tough to remain patient.

James Brumley has positions in Coca-Cola. The Motley Fool has positions in and recommends Amgen, Chevron, International Business Machines, Salesforce, ServiceNow, and Vanguard S&P 500 ETF. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.