Investing through exchange-traded funds (ETF) is a great way of gaining exposure to the stock market. ETFs are easy to purchase, have low fees, and offer strong diversification benefits. FTSE 100 ETFs are popular choices among UK investors and that's understandable, as they will provide exposure to a diversified portfolio of blue-chip names, such as Royal Dutch Shell, HSBC Holdings, Lloyds Banking Group and GlaxoSmithKline, with the click of a button.
However, if I was going to buy an ETF today with the intention of holding it for the long-term, there's several other ETFs I would consider buying over the FTSE 100 variant. Here's a look at three such ETFs offered by investment manager Vanguard.
Vanguard S&P 500 ETF
To diversify your portfolio properly, it's a good idea to add international stocks to the mix, in my opinion. There are several reasons for this. The first is that international stock markets can perform differently at different times. For example, while the FTSE 100 returned 9.4% per year for the five years up until the end of August, the US's S&P 500 index returned 14.3% per year in the same time period. That's a fairly significant difference.
Secondly, the composition of the key US index, differs remarkably from the composition of the FTSE 100 index. For example, the top five stocks by market capitalisation in the FTSE 100 at the end of August were HSBC Holdings, British American Tobacco, Royal Dutch Shell A, BP and Royal Dutch Shell B. In short - banks, tobacco and oil.
However, turning to the S&P 500, the top five stocks at the end of August were Apple, Microsoft, Facebook, Amazon.com and Johnson & Johnson. That's a much higher exposure to the fast-growing technology sector.
The Vanguard S&P 500 ETF(LSE: VUSA) could be an excellent way of gaining exposure to the S&P 500 index. Ongoing charges are just 0.07%.
Vanguard FTSE 250 ETF
Another growth ETF I'd buy would be a FTSE 250 one, thereby investing in the 250 largest companies, outside the FTSE 100. There's some fantastic up-and-coming companies in this index, such as DS Smith, RPC Group and Aldermore Group, and that has facilitated a five-year index return to the end of August of 14.7% per year.
While you'd think that the mid-cap index would be riskier than its big brother, according to FTSE Russell data, the five-year volatility for the FTSE 250 was 9.9% vs 10% for the FTSE 100, suggesting that over the long term, risk was actually slightly lower.
A good choice here in my opinion is the Vanguard FTSE 250 ETF(LSE: VMID). Ongoing charges are 0.10%.
Vanguard Emerging Markets ETF
Lastly, I'd also look at investing a portion of my portfolio in the emerging markets. A good option could be the Vanguard Emerging Markets ETF(LSE: VFEM).
Emerging markets as a whole are growing at a rate significantly higher than most developed countries. Furthermore, emerging markets now contribute up to 60% of the world's GDP, according to the International Monetary Fund. As a long-term investor, I would want to capitalise on this growth.
The Vanguard Emerging Markets ETF provides exposure to countries such as China, Taiwan, India and Brazil, and with a low ongoing charge of 0.25%, looks to be a good way to invest in these fast-growing economies.
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Edward Sheldon owns shares in Royal Dutch Shell, Aldermore Group, DS Smith and GlaxoSmithKline. The Motley Fool UK owns shares of and has recommended Amazon, Apple, Facebook, and GlaxoSmithKline. The Motley Fool UK has recommended BP, DS Smith, HSBC Holdings, Lloyds Banking Group, Royal Dutch Shell B, and RPC Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.