Playing the long game: Why ETFs are worth holding for 20-30 years

• Costs can have a major impact. A few basis points in fees may not sound like much, but over decades, they could add up to thousands of dollars in growth left on the table.
• Diversification does the heavy lifting. A single ETF can give you exposure to hundreds of companies, helping balance the ride through market ups and downs.
• Patience can pay off. The longer you stay invested, the more time compounding, reinvested dividends, and tax efficiency can work in your favor.

Would you buy a car based solely on its 0–60 time?

We’ll go out on a limb and assume you wouldn’t. You’d also consider gas mileage, safety features, comfort, and whether the engine can run reliably for 200,000+ miles.

Choosing an investment vehicle for your portfolio is a similar situation—there are plenty of factors to consider besides short-term performance.

That’s why so many investors turn to exchange traded funds (ETFs) for their long-term goals. Because they have the potential to provide diversified, low-cost, and tax-efficient portfolios, they’re built to handle the twists and turns of the multi-decade road ahead.

Why choose ETFs as long-term investments?

ETFs often help long-term investors compound wealth thanks to:

• Low costs
• Diversification
• Tax efficiency

In many ways, ETFs blend the best of both worlds: the simplicity of mutual funds with the flexibility of stocks.

Since most ETFs track broad market indexes, they’re designed to hold a wide mix of companies, industries, and sometimes even countries. That diversification helps stabilize your portfolio, especially when one sector lags or a single stock falls out of favor.

Many ETFs are also cost-friendly alternatives to mutual funds. The average ETF charges 0.58% in annual fees,¹ whereas the average mutual fund charges 0.90%.² That means more of your returns stay invested and working for you with the typical ETF.

As for taxes, the ETF structure creates an advantage: ETFs tend to distribute fewer taxable gains than mutual funds, allowing compounding to do its job uninterrupted.³

Long story short, ETFs may be the kind of vehicle you want if you’re planning to stay invested for 20 or 30 years.

Traits of ETFs built for decades

Some ETFs are like minivans (steady, versatile, and built to carry you comfortably over long distances). Others like 400cc dirt bikes (faster, more exciting, and able to handle rough terrain—but with a bumpier ride). If you plan to hold an ETF for multiple decades, you’ll want the one designed for endurance. So, how do you compare the rides?

How long should you hold ETFs?

If you’re investing with ETFs, the answer is simple: as long as it takes to reach your goals.

The longer you stay invested, the more compounding can help scale your portfolio over time. For example, let’s assume you invest $10,000 in an ETF earning an average 7% annual return and make $100 contributions each month.

• After 5 years, you’d have about $21,336
• After 10 years, roughly $37,405
• After 20 years, almost $92,480

Same investment, same yearly return—just more time.

Selling too early can disrupt that process. In fact, investors who sold out of S&P 500 exposures after one bad day ended up with roughly 50% less than investors who remained continuously invested.⁴ That’s because every sale risks missing out on some of the markets best days and missing out on the market’s rebound.

Of course, your timeline depends on your goal and stage in life:

Regardless of your time horizon, one principle holds true: time spent in the market beats timing the market. Like any long drive, you’ll make the most progress by staying steady behind the wheel.

Long-term performance factors to consider

We’ll admit it—there are instances when rapid acceleration is useful. Merging onto a busy highway. Making it through a major intersection on a yellow light (cautiously, of course). Passing tractors on a two-lane road (legally, of course). And probably a few others.

Even so, speed alone doesn’t make a great vehicle—just like short-term performance alone doesn’t make a great ETF.

When you’re investing for decades, a fund that races ahead one year might sputter the next. That’s why long-term investors should care just as much about how a fund earns those returns.

So, what should you evaluate?

• Investment style: Know whether the ETF is active or passive. Active ETFs can adapt to changing conditions but may carry higher costs; passive ETFs aim to mirror an index, which generally costs less in the form of a low expense ratio. 
• Holdings and strategy: Peek under the hood. Does the ETF focus on large, established companies, or does it target niche themes that may (or may not) last 20 years? 
• Turnover: A fund that trades its holdings too often can generate higher costs and taxable gains. Low turnover is often a sign of a disciplined, long-term strategy. (Something to keep in mind: active funds can have higher turnover.)
• Tracking error: This measures how closely a passive ETF follows its index. A smaller gap means it’s doing its job efficiently.
• Assets under management (AUM): Size isn’t everything, but larger funds typically have stronger liquidity and staying power.

Tips for long-term ETF investors

Investing for the long haul is a lot like a cross-country drive: you’ll hit stretches of open highway, patience-rattling traffic, a few potholes, and the occasional wrong turn.

Beyond assuming the 10 and 2 hand position, what are some good “driving” habits?

• Automate contributions. Set up recurring investments so you’re adding to your portfolio regularly, rain or shine. 
• Reinvest dividends. Don’t let cash pile up. Reinvesting dividends keeps compounding working in the background.
• Review once a quarter, not once a week. Check that your ETF mix still aligns with your goals and risk tolerance, but avoid the temptation to micromanage every market move.
• Stay diversified. Avoid loading up on a single theme or sector. A diversified mix of ETFs can help smooth returns when parts of the market struggle.
• Keep costs low. Revisit expense ratios occasionally and potentially pivot into lower-cost, higher-quality funds. 
• Think behaviorally. Your investment mentality is just as important as your investments themselves. The best investors know how to sit still and trust time to do the heavy lifting.
• Stay invested. Because every journey has its challenges, it’s important to keep your hands on the wheel.

ETFs: Built for the long haul

As reactive and fast-paced as the market can be, investing isn’t a sprint. Compounding takes time and discipline.

ETFs are built for that. They’re low-cost, diversified, and tax-efficient—designed to keep you moving steadily toward your goals, whether that’s retirement, college savings, or building generational wealth.

Getting there doesn’t happen overnight. It happens mile by mile, year by year.