The best long-term investments are assets held for 5 years or more that generate meaningful real returns — above inflation — over time. The S&P 500 has returned approximately 10% per year over the long run, doubling money roughly every 7 years. Real estate, dividend stocks, and tax-advantaged retirement accounts compound that growth further.
Best Long-Term Investments Ranked (2026)
| Investment | Avg. Annual Return (Historical) | Risk | Min. Time Horizon | Liquidity |
|---|---|---|---|---|
| S&P 500 index fund | ~10% (nominal); ~7% real | Moderate | 5–10 years | High |
| Total US market fund | ~10% (nominal) | Moderate | 5–10 years | High |
| International index fund | ~7%–9% | Moderate-High | 10+ years | High |
| Real estate (rental) | ~8%–12% incl. leverage | Moderate-High | 10+ years | Very Low |
| REITs | ~9%–11% | Moderate | 5+ years | High |
| Dividend stocks | ~8%–10% | Moderate | 7+ years | High |
| Roth IRA (invested in index funds) | Depends on holdings | Moderate | Lifetime | Moderate |
| 401(k) with employer match | Depends + match boost | Moderate | 20+ years | Low (until 59½) |
| I bonds | Inflation rate | Very Low | 1–5+ years | Low |
| Gold | ~5%–7% historically | Moderate | 10+ years | Moderate |
1. S&P 500 Index Funds
Best for: Most investors — the single best default long-term investment for the majority of people
An S&P 500 index fund buys all 500 companies in the S&P 500 index in proportion to their market cap. You own a tiny slice of Apple, Microsoft, Amazon, Google, Berkshire Hathaway, and 495 other companies with a single purchase.
| Fund/ETF | Expense Ratio | 10-Year Avg Annual Return | Min Investment |
|---|---|---|---|
| Vanguard VOO | 0.03% | ~13.1% | $1 |
| Fidelity FXAIX | 0.015% | ~13.2% | $0 |
| Schwab SCHX | 0.03% | ~13.0% | $0 |
| iShares IVV | 0.03% | ~13.1% | $1 |
| SPDR SPY | 0.0945% | ~13.0% | $1 |
Growth of $10,000 at 10% annual return:
| Years | Value |
|---|---|
| 10 | $25,937 |
| 20 | $67,275 |
| 30 | $174,494 |
| 40 | $452,593 |
2. Total Market Index Funds
Best for: Investors who want even broader diversification than the S&P 500
Total market funds include the S&P 500 plus thousands of mid-cap and small-cap US companies — over 3,500–4,000 total stocks. Historically performs very similarly to S&P 500 with slightly more exposure to smaller companies.
| Fund/ETF | Expense Ratio | Stocks Held |
|---|---|---|
| Vanguard VTI | 0.03% | ~3,700 |
| Fidelity FZROX | 0.00% | ~2,700 |
| Schwab SCHB | 0.03% | ~2,500 |
3. Real Estate Investment Trusts (REITs)
Best for: Real estate exposure without owning property; income-focused long-term investors
REITs are companies that own income-producing real estate (apartments, offices, retail, data centers, warehouses). They are required by law to pay out 90% of taxable income as dividends, resulting in high yield.
| REIT Type | Example ETF | Approx. Dividend Yield | 10-Year Return |
|---|---|---|---|
| Broad REIT index | VNQ (Vanguard) | ~4.0% | ~8%–9% |
| Commercial | XLRE | ~3.5% | ~8% |
| Residential | REZB | ~3.8% | ~9% |
| Data centers | Digital Realty, Equinix | ~2.5% | ~15% |
4. Dividend Stocks and Dividend ETFs
Best for: Investors who want income + growth; long-term compounders
Dividend stocks — companies that pay regular cash dividends — can be held for decades. When dividends are reinvested, the compounding effect is powerful.
| ETF | Focus | Yield | Expense Ratio |
|---|---|---|---|
| SCHD (Schwab US Dividend Equity) | Quality dividend growers | ~3.5% | 0.06% |
| VYM (Vanguard High Dividend Yield) | High-yield dividend stocks | ~3.0% | 0.06% |
| VIG (Vanguard Dividend Appreciation) | Companies that grow dividends | ~1.8% | 0.06% |
| DGRO (iShares Dividend Growth) | Dividend growth | ~2.3% | 0.08% |
5. Tax-Advantaged Retirement Accounts
Best for: Anyone with earned income — maximizing after-tax wealth requires tax-advantaged accounts
The account type matters almost as much as the investment:
| Account | 2026 Limit | Tax Advantage | Best Use |
|---|---|---|---|
| 401(k) Traditional | $23,500 / $31,000 (50+) | Pre-tax now; taxed on withdrawal | High earners expecting lower income in retirement |
| 401(k) Roth | Same as above | After-tax; tax-free growth + withdrawal | Younger workers expecting higher future income |
| Roth IRA | $7,000 / $8,000 (50+) | After-tax; tax-free forever | Anyone under $161K income (single) |
| HSA | $4,300 individual / $8,550 family | Triple tax-free | High-deductible health plan holders |
Invest the money inside these accounts in index funds. The account itself is just the tax wrapper.
6. Real Estate (Direct Ownership)
Best for: Investors with capital, risk tolerance, and willingness to manage property
Rental real estate can generate strong long-term returns via:
- Monthly rental income (cash flow)
- Appreciation (property value growth)
- Leverage (using a mortgage amplifies returns)
- Tax benefits (depreciation, mortgage interest deduction, 1031 exchanges)
Example — $400,000 rental property with 20% down:
- Down payment: $80,000
- Annual rental income: $24,000 ($2,000/month)
- Annual expenses (mortgage, taxes, insurance, maintenance): ~$19,200
- Net cash flow: ~$4,800/year (6% cash-on-cash return on $80K down)
- If property appreciates 4%/year: $16,000 gain on $80K invested = 20% return on equity
Long-Term Investment Principles
- Start early. Time in the market beats timing the market. A 25-year-old investor has 40 years of compounding; a 45-year-old has 20.
- Keep costs low. A 1% expense ratio vs. 0.03% costs $200,000+ over a 30-year, $100,000 portfolio.
- Stay diversified. Never put all long-term wealth in a single stock, sector, or asset class.
- Don’t panic. Long-term investors should expect bear markets every 3–7 years. Those who stay invested recover and surpass prior peaks.
- Automate contributions. Dollar-cost averaging removes emotion from investing.
Long-term investing is built on compounding — see rule of 72 to understand how quickly different return rates double your money. For a side-by-side comparison of long-term investment options, see types of investments. The biggest enemy of long-term returns is fees — see cost of investment fees over time for the dollar impact of expense ratios compounded over 20–30 years.
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