3 Simple ETFs to Buy With $1,000 and Hold for a Lifetime

If you're looking for the smartest way to invest a relatively small amount of money for the long haul, the fact is, picking individual stocks may not be your best bet. Something much simpler that doesn't require any real ongoing monitoring may be the much smarter way to go. That's exchange-traded funds, or ETFs, which are built from the ground up to be low-maintenance buy-and-hold vehicles.

With that as the backdrop, here's a closer look at the three ETFs that most investors might want to start with, and perhaps even finish with.

Invesco S&P 500 Equal Weight Technology ETF

They may be volatile. But even most investing novices innately understand that this volatility is the price you pay for the above-average returns that only technology stocks can dish out. Simultaneously, while picking individual tech stocks can be a lot of fun, most investors also understand that owning a basket of technology names is a much easier way to capitalize on this long-term tailwind.

Even familiar technology ETFs bring a potential problem to the table, though. That is, since most of them are market-cap-weighted, they're also dangerously top-heavy right now due to the recent oversized gains that most of the biggest names in the business -- like the Magnificent Seven -- have produced. For instance, the Vanguard Information Technology ETF's (NYSEMKT: VGT) top three (of 320) holdings collectively make up 43% of the fund's total value, while the Technology Select Sector SPDR Fund (NYSEMKT: XLK) comes packed with a similar risk. That is, the same names that drove most of the sector's gain since 2023 could sell off as quickly and as much as they rallied, dragging these ETFs' value lower.

Image source: Getty Images.

Fortunately, there's a simple solution. That's the Invesco S&P 500 Equal Weight Technology ETF (NYSEMKT: RSPT).

Just as the name suggests, this exchange-traded fund owns the same stocks as XLK and VGT...just in different proportions. Invesco makes a point of preventing any of this ETF's 70 holdings from making up too much of the portfolio's value, by re-equalizing the size of each of these positions on a quarterly basis. This of course has the effect of locking in profits as a particular technology stock outclimbs the overall market.

Schwab U.S. Dividend Equity ETF

With nothing more than a passing glance from a distance, the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) looks similar enough to other dividend-oriented exchange-traded funds like the ProShares S&P 500 Dividend Aristocrats ETF (NYSEMKT: NOBL) or the Vanguard Dividend Appreciation ETF (NYSEMKT: VIG).

Look closer, though, and clear differences surface. Chief among them is their yields, while a close-second difference is their performances since the end of 2022. Because NOBL and VIG have both performed so well, their trailing dividend yields have been pared back to just over 2% and just under 1.6%, respectively, versus SCHD's yield of 3.5% following its market-lagging performance for the past three years.

NOBL Total Return Level data by YCharts

What gives?

It's not so much what the ETF's holding, but rather, what it's not holding. Built to mirror the Dow Jones U.S. Dividend 100™ Index, this fund prioritizes higher-yielding stocks with the very best fundamentals. That means it doesn't own stocks like Apple, Microsoft, and Broadcom, which technically pay a dividend, but not much of one. Investors mostly choose those tickers for the growth they've produced of late.

The market's dynamic is changing though. Growth stocks are increasingly surrounded by skepticism. Value stocks (which includes most dividend stocks, and vice versa), on the other hand, are becoming en vogue again. Not that the near-term means much to "lifetime" investors, but it wouldn't be wrong to lock in your effective yield on any new position in the Schwab U.S. Dividend Equity ETF before it shrinks even further.

SPDR S&P 500 ETF Trust

Finally, add the SPDR S&P 500 ETF Trust (NYSEMKT: SPY) to your list of simple ETFs to buy and hold for a lifetime, although if you're a Vanguard fan you'd be just as well off with a stake in the comparable Vanguard S&P 500 ETF (NYSEMKT: VOO). Both are dirt cheap to manage, and both facilitate the exact same strategy. That's index investing, of course. Rather than attempting to beat the market, with indexing, you're just trying to match the S&P 500's (SNPINDEX: ^GSPC) long-term average annual gain of about 10%.

The thing is, this is actually the most statistically sound bet to make.

It's true! Given enough time, most professional and amateur stock-pickers alike tend to underperform the broad market. As numbers from Standard & Poor's remind us, over the course of the past five years, nearly 87% of large-cap mutual funds failed to beat the S&P 500. The 10-year figure isn't much better, at 86%. And for the past 15 years, more than 88% of large-cap funds lagged the index. It's a testament to just how difficult it is to beat the market.

And for the record, it's not like hedge funds and other types of investment managers fare any better.

If you want to play the odds, your best move may be simply trying to match the market's performance rather than beat it...at least with a decent-sized foundational chunk of your portfolio.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, ProShares S&P 500 Dividend Aristocrats ETF, Vanguard Dividend Appreciation ETF, and Vanguard S&P 500 ETF. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.