The truth is simple: even small differences in expense ratios can compound dramatically over decades. A 0.03% difference in fees between two similar ETFs may seem negligible today, but over 30 years, it can translate into tens of thousands of dollars in lost returns. That’s why identifying the best low-fee ETFs is essential for anyone serious about building wealth through passive, long-term investing.
In this comprehensive guide, we’ll explore the top low-cost ETFs ideal for long-term investors, the key factors to consider when selecting them, and how to build a diversified, low-fee portfolio that can weather market cycles and deliver solid returns over time.
Why Low Fees Matter in Long-Term Investing
Before diving into specific ETFs, it's important to understand why fees matter—and how they erode returns over time.
Let’s consider a real-world example. Suppose you invest $10,000 in an ETF that returns 7% annually before fees. In one case, the ETF has an expense ratio of 0.03%; in another, it has a 0.50% expense ratio. After 30 years:
- The low-fee ETF (0.03%) grows to $75,329
- The higher-fee ETF (0.50%) grows to $65,436
That’s a difference of nearly $10,000—all due to fees.
This is the magic (and danger) of compound growth. Even marginally higher costs can significantly reduce your net returns, especially in long-term investing, where your money is compounding for decades.
Historically, studies—including those by Vanguard founder John C. Bogle—have demonstrated that low-cost index funds consistently outperform higher-cost actively managed funds over time. The same principle applies to ETFs: lower expenses mean more of your investment gains stay in your pocket.
Criteria for Choosing the Best Low-Fee ETFs
When selecting ETFs for long-term investing, it’s not enough to look solely at the expense ratio. While cost is a primary factor, several other elements should be considered:
1. Expense Ratio: The percentage of assets charged annually to manage the fund. For long-term investing, aim for ETFs with an expense ratio below 0.10%.
2. Index Tracked: The underlying index determines the risk and return profile. Broad-market indexes (e.g., S&P 500, Total Stock Market) offer diversification and long-term growth.
3. Liquidity and Trading Volume: High trading volume and large asset bases reduce bid-ask spreads and make it easier to buy and sell shares.
4. Tracking Error: A measure of how closely the ETF follows its benchmark. Low tracking error means the ETF performs similarly to the index it’s designed to mirror.
5. Dividend Reinvestment: For long-term growth, reinvesting dividends is key. Ensure the ETF pays dividends and is compatible with your brokerage’s dividend reinvestment plan (DRIP).
6. Tax Efficiency: ETFs are generally more tax-efficient than mutual funds due to their structure. Choose ETFs that minimize capital gains distributions.
7. Provider Reputation: Stick with well-established, reputable providers like Vanguard, iShares (BlackRock), and State Street (SPDR).
With these principles in mind, let’s examine the best low-fee ETFs for long-term investors.
1. Vanguard S&P 500 ETF (VOO)
- Expense Ratio: 0.03%
- AUM: Over $300 billion
- Index Tracked: S&P 500
The Vanguard S&P 500 ETF (VOO) is a cornerstone of many long-term portfolios. It provides exposure to the 500 largest U.S. companies and has consistently delivered strong long-term returns that match the performance of the S&P 500 index.
Why VOO stands out:
- Extremely low expense ratio (0.03%)
- Low tracking error
- High liquidity and stable management
- Great for dividend reinvestment
VOO is ideal for investors who want simple, broad exposure to the U.S. large-cap market. While it doesn't include small- or mid-cap stocks, it covers the core of the U.S. equity market and has historically delivered average annual returns of around 10% over the long term.
2. iShares Core S&P 500 ETF (IVV)
- Expense Ratio: 0.03%
- AUM: Over $300 billion
- Index Tracked: S&P 500
IVV is essentially the BlackRock equivalent of VOO. It also tracks the S&P 500 and offers the same low fees and broad exposure. With nearly identical performance and cost structure, IVV is an excellent alternative, especially for investors using platforms that offer commission-free trading on iShares ETFs.
While VOO and IVV are nearly interchangeable, VOO often edges out slightly in tracking error and tax efficiency—though the differences are minimal.
3. Vanguard Total Stock Market ETF (VTI)
- Expense Ratio: 0.03%
- AUM: Over $350 billion
- Index Tracked: CRSP US Total Market Index
If you're aiming for full U.S. market exposure—including large-, mid-, small-, and micro-cap stocks—VTI is an outstanding choice. Unlike the S&P 500, which focuses only on the largest companies, VTI gives you access to nearly the entire U.S. equity market (about 3,500+ stocks).
Why VTI is ideal for long-term investing:
- More diversified than S&P 500 ETFs
- Same rock-bottom expense ratio as VOO (0.03%)
- Historically, small- and mid-cap stocks contribute to higher long-term returns
- Vanguard’s strong track record in index fund management
VTI is particularly powerful when used as a core holding in a long-term portfolio, allowing investors to benefit from the full breadth of the U.S. economy.
4. Schwab U.S. Broad Market ETF (SCHB)
- Expense Ratio: 0.03%
- AUM: Over $25 billion
- Index Tracked: Dow Jones U.S. Broad Stock Market Index
SCHB is Schwab’s answer to VTI. It offers similar total market exposure and has an identical expense ratio. While smaller in assets under management, it's highly liquid and commission-free at Schwab.
SCHB also has a slight edge in tax efficiency and has occasionally outperformed VTI by a few basis points due to index construction differences. For investors already using a Schwab brokerage account, SCHB is a compelling low-cost option.
5. iShares Core MSCI Total International Stock ETF (IXUS)
- Expense Ratio: 0.07%
- AUM: Over $70 billion
- Index Tracked: MSCI ACWI ex USA IMI Index
While U.S. markets have historically outperformed, long-term investors should not ignore international diversification. IXUS provides exposure to developed and emerging market stocks across more than 40 countries, excluding the U.S.
Key benefits:
- Broad global diversification
- Low cost for an international ETF
- Currency-hedged versions available (though not necessary for long-term investors)
- Helps reduce portfolio concentration risk
While international stocks have underperformed the U.S. over the past decade, diversification remains a prudent strategy. Over long time horizons, global markets tend to converge in performance, and holding international assets can smooth volatility.
6. Vanguard FTSE Developed Markets ETF (VEA)
- Expense Ratio: 0.05%
- AUM: Over $90 billion
- Index Tracked: FTSE Developed All Cap ex US Index
VEA focuses specifically on developed markets outside the U.S., such as Japan, the UK, Germany, and Canada. It excludes emerging markets, making it slightly less volatile than IXUS.
VEA is a strong choice for investors who want to separate emerging markets from developed ones in their allocation strategy. Its lower expense ratio (0.05% vs. IXUS’s 0.07%) makes it slightly more cost-efficient for developed-market exposure.
7. Vanguard FTSE Emerging Markets ETF (VWO)
- Expense Ratio: 0.11%
- AUM: Over $70 billion
- Index Tracked: FTSE Emerging Markets All Cap China A Inclusion Index
Emerging markets represent high-growth potential but come with higher volatility and risk. VWO gives investors exposure to fast-growing economies like China, India, Taiwan, and Brazil.
While its expense ratio (0.11%) is slightly higher than other ETFs on this list, it’s still considered low for an emerging markets fund and remains one of the most cost-effective ways to gain exposure to this asset class.
For long-term investors, a modest allocation (10–20%) to emerging markets can enhance returns and provide diversification, even during periods of U.S. market dominance.
8. iShares Core U.S. Aggregate Bond ETF (AGG)
- Expense Ratio: 0.03%
- AUM: Over $90 billion
- Index Tracked: Bloomberg U.S. Aggregate Float Adjusted Index
No long-term portfolio is complete without bonds. AGG offers broad exposure to investment-grade U.S. bonds, including Treasuries, corporate bonds, and mortgage-backed securities.
Why AGG matters:
- Extremely low cost (0.03%)
- Provides stability and income
- Historically low correlation with stocks, which helps reduce portfolio volatility
For long-term investors, especially those approaching retirement, a balanced allocation including bonds (e.g., 80% stocks / 20% bonds) can help manage risk while still maintaining growth potential.
9. Vanguard Total Bond Market ETF (BND)
- Expense Ratio: 0.03%
- AUM: Over $70 billion
- Index Tracked: Bloomberg U.S. Aggregate Float Adjusted Index
BND is Vanguard’s version of AGG and is nearly identical in composition and cost. Like VTI and VOO, it benefits from Vanguard’s low-cost structure and tax efficiency.
BND is ideal for investors who prefer to keep their bond and equity holdings within the same provider for simplicity and synergy.
10. Vanguard Total World Stock ETF (VT)
- Expense Ratio: 0.07%
- AUM: Over $60 billion
- Index Tracked: FTSE Global All Cap Index
VT is the ultimate “one-fund” solution for global diversification. It holds over 9,000 stocks across developed and emerging markets in a single ETF.
With a single purchase of VT, you gain:
- Exposure to the entire global equity market
- Automatic rebalancing between U.S. and international stocks
- A simple, low-maintenance holding
VT is perfect for investors who want a truly passive, set-it-and-forget-it approach. Its 0.07% expense ratio is remarkably low for such a comprehensive fund.
Building a Long-Term Portfolio with Low-Fee ETFs
Now that we’ve reviewed the top low-fee ETFs, let’s look at how to assemble them into a powerful, long-term portfolio.
Here’s a sample diversified portfolio using only the ETFs listed above:
Aggressive Growth Portfolio (e.g., Young Investors)
- 60% VTI (U.S. Total Stock Market)
- 30% IXUS (International Stocks)
- 10% VWO (Emerging Markets)
- Expense Ratio: ~0.05%
Balanced Portfolio (e.g., Mid-Career Investors)
- 50% VTI
- 20% IXUS
- 20% AGG (or BND)
- 10% VWO
- Expense Ratio: ~0.04%
Simple Global Portfolio (One-Fund Solution)
- 100% VT (Total World Stock ETF)
- Expense Ratio: 0.07%
Each of these portfolios offers broad diversification, low costs, and exposure to long-term growth drivers of the global economy. By minimizing fees and maximizing exposure, they position investors for decades of compounding growth.
Final Thoughts: Simplicity, Patience, and Costs Win
The best investment strategy for most people isn’t complicated. It’s about buying quality assets at low cost, holding them for a long time, and letting compounding work its magic.
The ETFs highlighted in this guide—VOO, VTI, IXUS, AGG, VT, and others—embody these principles. They are the workhorses of modern passive investing, trusted by millions of investors worldwide.
As you build your long-term portfolio, remember these key takeaways:
- Prioritize low expense ratios—every basis point saved is return earned.
- Diversify geographically and across market caps to reduce risk.
- Stick to the plan—avoid market timing and emotional decisions.
- Reinvest dividends to harness the full power of compounding.
- Review annually, but resist the urge to over-optimize.
The road to wealth isn’t found in chasing the next hot stock or fund. It’s built through disciplined, low-cost investing over decades. And with the right low-fee ETFs at your side, that journey becomes not only achievable—but predictable and empowering.
So ask yourself: What are the best low-fee ETFs for long-term investing? The answer is clear. Start with the giants—VTI, VOO, IXUS, AGG, VT—and let time do the rest.