The 3 ETFs I'll Never Sell and Why You Shouldn't Either

Today, I want to talk about three ETFs that have become essential to my long-term investment strategy. These aren’t just any ETFs; they’re investments I plan to keep forever. If you’re saving for retirement, I believe these ETFs can help you secure a stable financial future. Let’s dive into why I think these three ETFs — SCHD, SPY, and QQQ — are worth holding onto and how they can bring consistent returns.

Setting the Goal: Living Off My Investments

The dream is simple: I want my brokerage account to provide me with enough income to live comfortably in retirement. Whether you’re aiming to retire early or just preparing for your golden years, the goal is the same — grow a portfolio that supports your lifestyle without worry. While everyone’s financial situation varies, using tax-efficient accounts for growth and compounding is crucial. Let’s explore why these ETFs fit that strategy so well.

The Big Three ETFs

The ETFs I’m focused on are SCHD, SPY, and QQQ. Each one has a specific purpose and complements the others, providing a well-rounded base for growth, income, and diversification.

1. SCHD (Schwab U.S. Dividend Equity ETF): This fund mimics the Dow Jones U.S. Dividend 100 Index and has a remarkably low expense ratio of just 0.06%. This means if you invest $1,000, you’ll pay only about 60 cents a year in fees. With a current dividend yield of around 3.39%, SCHD provides a steady income source, which is beneficial for reinvesting and compounding. Plus, it has a high asset base of $64 billion, making it a stable and reliable option.
   
2. SPY (SPDR S&P 500 ETF): If you could only invest in one ETF, SPY might be the one to pick. It tracks the S&P 500, offering exposure to large, high-performing U.S. companies. The expense ratio is slightly higher than SCHD, but it’s still low by industry standards. With a turnover ratio of only 2%, this fund holds stocks for an extended period, meaning less trading and lower costs. SPY’s top holdings include Apple, Nvidia, Microsoft, and other market giants, giving you access to some of the most significant growth drivers in the U.S. economy.
   
3. QQQ (Invesco QQQ Trust): QQQ focuses on the Nasdaq 100, which includes high-growth tech companies like Microsoft, Adobe, and Nvidia. While its expense ratio is a bit higher and the dividend yield is relatively low, QQQ excels in growth potential. Its tech-heavy portfolio allows it to outperform during bull markets, as tech companies can achieve higher returns on capital with less investment.
   
   

Breaking Down Each ETF's Key Details

Let’s take a deeper look into why each ETF has a unique place in a retirement portfolio.

SCHD: Schwab U.S. Dividend Equity ETF

• Expense Ratio: 0.06% – Incredibly low, making it a cost-effective choice.
• Dividend Yield: 3.39% – An attractive yield, especially in a high-valuation market where dividend-paying stocks offer stability.
• Turnover Ratio: 28% – This means the fund holds stocks for an average of about four years.
• Top Holdings: Ford, Home Depot, Cisco, and Chevron — all companies that are unlikely to go anywhere soon.
  
  

SPY: SPDR S&P 500 ETF

• Expense Ratio: Slightly higher than SCHD, though still low.
• Dividend Yield: Lower, which makes sense given the tech-heavy “Magnificent 7” (Apple, Nvidia, Microsoft, etc.) in the index.
• Turnover Ratio: 2% – Meaning it holds positions for an average of 50 years.
• Top Holdings: Apple, Microsoft, Amazon, and Berkshire Hathaway – top players that are resilient and significant market movers.
  
  

QQQ: Invesco QQQ Trust

• Expense Ratio: 0.2% – Higher than SPY and SCHD but justified by its growth-oriented focus.
• Dividend Yield: Low, but that’s expected from a tech-heavy portfolio.
• Top Holdings: Apple, Nvidia, Microsoft, Tesla, and Costco. The Nasdaq 100 is known for high-return companies that reinvest their profits, making QQQ an excellent growth driver in a balanced portfolio.

Why Diversification Works: Hedging with ETFs

Some might see holding multiple ETFs as over-diversification, but each of these ETFs has a unique role. SCHD offers stability and income, SPY gives exposure to the overall market, and QQQ taps into tech growth. If one sector underperforms, the others often balance it out. This way, I’m hedging my bets across sectors, which smooths out returns and provides a buffer against market volatility.

Outperforming with Dollar Cost Averaging and Long-Term Holding

Many investors worry about market timing, but dollar cost averaging (DCA) makes that less of a concern. Even if you started investing in QQQ and SPY at the market’s peak in 2000, regular DCA contributions would have yielded impressive returns by today. I ran the numbers: from the absolute peak in 2000, $200 per month invested in QQQ would result in a 13.5% annualized return, while the S&P 500 would yield around 10.5%. That’s the power of consistent investing and compounding over time.

My Strategy Moving Forward

While I don’t currently own any of these ETFs, my plan is to start dollar-cost averaging into each one. History shows that lump-sum investments often perform better, but psychologically, dollar cost averaging aligns better with my approach. And with cash yielding around 4.5%, there’s no rush.

In addition to holding these ETFs, I also sell covered calls and cash-secured puts to generate 1-3% additional income per year. Many in our community have seen even better returns through this strategy, which is a great way to add incremental gains while holding these funds.

Final Thoughts: Why These ETFs Are Staying in My Portfolio

Between SCHD’s stability, SPY’s market exposure, and QQQ’s growth potential, these ETFs provide a balanced, diversified, and reliable foundation for a retirement portfolio. For anyone looking to secure their financial future, these ETFs are a fantastic place to start and hold onto.

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