But when markets fall, this offers a great chance to add to existing or new investments.
Here are three ETFs I’d buy and hold for the next 10 years.
1. VanEck MSCI International Quality ETF (ASX: QUAL)
QUAL provides investors with a basket of high-quality companies outside of Australia.
The basis for quality is founded on three key factors:
- High return on equity
- Stable annual earnings growth
- Low financial leverage
High returns on equity mean a company earns a greater return on investments than the average business.
Stable profit growth eliminates cyclical companies such as mining, which have profits that go up and down like a yo-yo.
Low financial leverage means low debt compared to cash and other assets, protecting a company from a crisis or financial downturn.
Most of the companies 296 companies inside the ETF are held in the United States (74%), followed by Switzerland (6%) and the United Kingdom (4%).
Notable holdings include Apple, Microsoft and Google owner Alphabet.
For a management fee of just 0.40% per annum, QUAL is a great core portfolio candidate for long-term investors.
2. BetaShares Cloud Computing ETF (ASX: CLDD)
Cloud computing is one of the big mega-trends exciting investors given the industry is expected to grow by 17.5% per annum over the next five years.
Why is the sector growing so fast?
Data is abundant, and it needs to be stored somewhere.
Add in more people working from home, smart home appliances and the rise of cloud storage and it’s little to no surprise the industry is growing so fast.
CLDD offers investors a chance to participate in this mega-trend.
It owns 30 companies across the cloud ecosystem including data centres, software, cybersecurity and cloud services.
Notable holdings include Dropbox, Vimeo and Zscaler.
Its management fee of 0.67% is a little on the high end but offers great exposure to the leading cloud computing companies.
CLDD would form part of the satellite component of a portfolio and would be suitable for investors with a long-term horizon.
3. BetaShares S&P 500 Equal Weight ETF (ASX: QUS)
QUS consist of the most widely-owned index – the S&P 500 – with a slight twist.
Instead of a company’s weighting based on its size, this ETF gives an equal weighting to all companies.
That means the largest company is given the same weighting as the 500th one.
Why is that important?
Well, big tech (Amazon, Tesla, Apple, etc.) are becoming so big that a large part of the index is based purely on movements in their share prices.
While the S&P 500 might have 500 companies, just 10 of them make up 30% of the index.
For that reason, the equal-weighted QUS is my preferred pick so investors are not overweight particular companies.
QUS could form part of the core portfolio as a substitute for a broad base index.
Or it could be a satellite holding if investors already have a decent exposure to the United States or index ETFs.