The Best ETF to Buy and Hold for the Next 20 Years

When evaluating individual stocks, exchange-traded funds (ETFs), or sectors, comparisons are one of the go-to plays of the investing game.

There is a long-running debate about growth versus value stocks. Actually, it's not much of a debate, nor is it much of a competition. Over the past decade, the Vanguard Morningstar Growth ETF (NYSEMKT: VUG) returned nearly 431%, or more than double the gains notched by the S&P 500 Value Index. Undoubtedly, dedicated value investors have been frustrated, and some of the style's flaws have been exposed, indicating it needs to evolve with the times.

This Vanguard ETF is heavy on growth stock stars like Apple. Image source: Getty Images.

On the other hand, with minimal effort, investors who embraced vehicles such as the Vanguard Growth ETF have been handsomely rewarded. There are apt to be periods when value struts its stuff, but this growth ETF is setting up for another long-term run of outperformance. Here's why.

VUG will be victorious

Home to an array of the largest tech companies by market cap and more, this $232.9 billion Vanguard ETF debuted in January 2004. Since then, it's made a habit of trouncing not only value stocks but also the broader market.

Data by YCharts.

Obviously, there are no promises that history will repeat itself, and it cannot be ignored that the strength of large- and megacap growth stocks has been remarkably persistent. However, the long-running durability of growth investing doesn't mean it has an expiration date. It doesn't, and adding to the potential long-term potency of this Vanguard ETF is that many of its 147 holdings are quality companies. Many of these firms command premiums over value stocks, not just because they have faster rates of earnings growth but because of their business momentum.

As just one example of quality, six of the 10 most cash-rich domestic companies, including Nvidia and Apple, among others, rank among this ETF's top 10 holdings. That level of quality can protect long-term investors. When it comes to business momentum, artificial intelligence (AI) is just scratching the surface of what it could become, and members of this ETF's roster have track records of innovation. On the other hand, many companies with the value designation operate in slower-growing, less exhilarating industries.

Two more points underscore why this Vanguard fund can be a star over the next two decades. First, highly profitable growth companies have rewarded investors over the long haul. Second, when the economy experiences lulls, which is sure to happen at some point over the next 20 years, growth stocks could outperform. The reasoning is simple: When growth is hard to come by, investors flock to known growth entities.

This ETF has more highlights

As they gain experience and knowledge, investors should absolutely consider building diverse portfolios comprised of a significant number of stocks and funds. Due to its straightforward approach, the Vanguard Morningstar Growth ETF can serve as a cornerstone of a portfolio for investors of all skill levels. And for those new to the game, this fund is an effective tool because it provides blanket-like coverage in the domestic large- and megacap growth space, removing the need to select individual stocks.

Plus, with an annual expense ratio of just 0.03%, or $3 on a $10,000 stake, long-term investors won't see their returns eroded by high fees.

Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Nvidia, and Vanguard Morningstar Growth ETF. The Motley Fool has a disclosure policy.