Do you want to retire rich? 2 ETFs to Buy Now and Hold for Decades

Exchange traded funds (AND F) offer investors a simple, inexpensive way to spread their bets across hundreds or even thousands of companies, eliminating the need to try to find individual winning stocks. This broad diversification can help you reduce your risks while allowing you to take advantage of powerful trends, like the boom in artificial intelligence (AI).

Here are two ETFs that are particularly well constructed to offer their shareholders wealth-generating gains in the years and decades to come.

Here’s how to take advantage of the growth of big tech and AI

THE Invesco QQQ ETF (NASDAQ: QQQ) is designed to track the Nasdaq-100 Index, which includes the world’s 100 largest non-financial companies. Nasdaq Composite. It’s full of tech titans, including the popular “Magnificent Seven” stocks, all of which are among the fund’s main holdings.

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Share of Invesco QQQ ETF fund allocation

Data source: Invesco.

These are some of the most powerful and profitable companies on the planet. Their significant representation within this Invesco ETF can provide your portfolio with a lucrative combination of proven performance and attractive long-term growth potential.

The ETF is also full of AI stocks outside of the Magnificent Seven that could have even better growth prospects. Chipmakers like Broadcom And Advanced microsystems and AI-powered cybersecurity leaders like Palo Alto Networks And Crowd strike counted among the fund’s assets.

It’s important to note that the fund has a reasonable expense ratio of 0.2%, which equates to fees of just $2 per $1,000 invested annually. By keeping its fees low, the Invesco QQQ ETF gives you a simple, cost-effective way to benefit from the growth of 100 of the biggest and best companies in the tech- and AI-rich Nasdaq Composite Index.

This small-cap fund could boost your returns

While size and strength are certainly advantages for many Nasdaq-100 companies, there are other advantages to owning stakes in smaller, faster-growing companies. This is where the Vanguard Russell 2000 ETF (NASDAQ: VTWO) comes into play.

The Vanguard Russell 2000 ETF can give you exposure to a wide range of small and mid-cap stocks. It holds nearly 2,000 stocks, with a median market capitalization of $3 billion. This stands in stark contrast to the Invesco QQQ ETF, which has a weighted market cap of more than $980 billion due to the outsized impact of the mega-cap companies it holds. These two ETFs therefore go well together. Together, they can provide your portfolio with a wealth-building mix of big stalwarts and small, high-potential newcomers.

The story continues

Interestingly, stocks owned by the Vanguard Russell 2000 ETF are currently trading at a steep discount to their larger rivals. The fund’s weighted price-to-earnings (P/E) ratio of 15 is approximately 57% lower than the Invesco QQQ ETF’s P/E of 35. This discount is one reason why Fundstrat analyst Tom Lee, thinks that the Russell 2000 – the index tracked by the Vanguard Russell 2000 ETF – could rise 45% in 2024.

Interest rate cuts could also spark a rally in the Vanguard Russell 2000 ETF. With inflation moderating, the Federal Reserve is expected to begin cutting interest rates later this year. Small businesses tend to benefit more than larger businesses when rates fall because they are able to obtain the growth financing they need on more attractive terms.

Better yet, the Vanguard Russell 2000 ETF’s annual expense ratio of just 0.1% will allow you to keep more of those potential gains for yourself, rather than paying them in management fees.

Should you invest $1,000 in the Vanguard Russell 2000 ETF right now?

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Joe Tenebruso has positions at Amazon. The Motley Fool holds positions and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, CrowdStrike, Meta Platforms, Microsoft, Nvidia, Palo Alto Networks and Tesla. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Do you want to retire rich? 2 ETFs to Buy Now and Hold for Decades was originally published by The Motley Fool

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