Just Starting Out With $5,000? 3 Magnificent ETFs to Buy in 2026.

The best time to start investing is always right now, because one of the most fool-proof ways to build wealth is time in the market. In fact, it probably matters more than anything.

The longer your investment time horizon is, the more time you have for compounding to accelerate the growth of your portfolio. For example, if you started out with $5,000 and invested it in three exchange-traded funds (ETFs) that had an average annual return of 10% for 10 years, and contributed $100 per month to it, you would have about $33,000.

But say you did that for 20 years. You would have $105,000. And if you did it for 30 years, that $5,000 would grow to $230,000.

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Now let's say you did better than 10%. You beat the average and had an average annual return of 13%. After 10 years, you would have $40,000; after 20 years, you would have $160,000; and after 30 years, you would have a staggering $568,000. That's the power of compounding and time in the market.

The next question is, which three ETFs could get you an average return of 13% during the next 20 or 30 years?

How about these three?

1. Vanguard Information Technology ETF

With a time frame of 20 years or more, a new investor should consider a sizable allocation to a growth fund. They may be more volatile and subject to short-term swings, but over time, the growth outweighs the dips, and they historically produce superior long-term returns.

My top choice for growth would be the Vanguard Information Technology ETF (NYSEMKT: VGT).

During the past 20 years, it has produced an average annualized return of 17.4% as of Aug. 28. That beats all of the other major broad technology ETFs. (No. 2 is the iShares US Technology ETF at 17.2%.)

This ETF is cheaper than the rest, with a 0.09% expense ratio, and more diversified, with 319 holdings as it taps into the broad universe of tech stocks, not just large caps. The top three holdings are Nvidia (NASDAQ: NVDA), Apple (NASDAQ: AAPL), and Microsoft (NASDAQ: MSFT).

2. Schwab U.S. Dividend Equity ETF

The next choice would be a dividend fund, because a good dividend fund often serves as a portfolio foundation, made up mostly of value stocks -- with the benefit of more dividend income and a higher total return. My choice would be the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD).

This ETF doesn't have a 20-year track record yet, as it launched in 2011. But it does have a 15-year track record and during that time, it has had an average annualized return of 10.1%. With dividends reinvested, the total return shoots up to 13.6%.

It invests in the Dow Jones U.S. Dividend 100 Index, which has various screens to find the most sustainable, high-yielding dividend stocks. Eligible stocks must have at least 10
straight years of dividend payments, a market cap of $500 million or more, and meet various liquidity and performance requirements. From there, the index is comprised of the highest-yielding dividend stocks with no single stock representing more than 5% of the portfolio. The current top three holdings are Merck (NYSE: MRK), Amgen (NASDAQ: AMGN), and Abbott Labs (NYSE: ABT).

This ETF should perform well when the Vanguard Information Technology ETF and perhaps other growth funds don't, giving you a nice balance to smooth out returns in volatile markets.

3. Vanguard S&P 500 ETF

The third ETF to include in an initial portfolio is the Vanguard S&P 500 ETF (NYSEMKT: VOO). This is the largest ETF in the world and for good reason, as an S&P 500 ETF should be a staple in a portfolio, and the fund's low 0.03% expense ratio makes it a popular choice.

This ETF, established in 2010, doesn't have a 20-year track record, but the S&P 500 certainly does. The S&P 500 has had an average annualized total return of 11.4% during the past 20 years.

You know what's in this one, and you could certainly swap this ETF out for a State Street or iShares S&P 500 ETF. There is some overlap with Vanguard Information Technology fund, but this fund is far broader, going beyond technology sector stocks to include the 500 largest stocks trading in the U.S. across all industry sectors.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories, Amgen, Apple, Merck, Microsoft, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.