90% Of My Investments Are in ETFs. Here’s Why

Since I am in my 40s, I’ve been building toward retirement for a while now, with a solid amount of money set aside for my later years. I also keep some investments in taxable brokerage accounts in case early retirement becomes an option.

As I’ve made my investment choices, one pattern has emerged clearly and consistently. While I own a handful of individual stocks, roughly 90% of my portfolio is in ETFs. Here’s why that approach works for me, along with some practical guidance on whether ETFs might be the right fit for you.

The ETF industry itself underscores how mainstream this strategy has become. Global ETF assets stood at $19.84 trillion at the end of 2025, then surged to a new record of $23.11 trillion by the close of July 2026, a gain of more than 16% in just seven months, according to ETFGI. Year-to-date net inflows reached $1.71 trillion by that point, already the highest annual total on record. In the U.S. alone, net new ETF flows reached approximately $1.49 trillion in 2025, a 32% increase over 2024’s prior annual record. Clearly, a lot of investors have reached a similar conclusion.

1. ETFs often outperform individual investments over time

The primary reason the bulk of my money sits in ETFs is straightforward: exchange-traded funds give me the best realistic odds of long-term investment success.

Specifically, I’ve invested heavily in ETFs that track the S&P 500, giving me exposure to roughly 500 of the largest U.S. companies. Vanguard S&P 500 ETF (NYSEARCA:VOO), which crossed the $1 trillion AUM milestone on June 2, 2026, and now holds more than $1.5 trillion in net assets, is one of the most popular ways to access this benchmark. The S&P 500’s average 30-year annualized return through December 2025 was 10.4%, close to its historic long-run average of about 10%. Individual stocks can obviously deliver much more than that in any given year, but consistently picking a broad basket of stocks that beats a 10% annual benchmark is genuinely difficult to do.

The data makes the challenge clear. According to the SPIVA U.S. Year-End 2025 Scorecard from S&P Global, 79% of active large-cap U.S. equity funds underperformed the S&P 500 in 2025, the fourth-worst annual result for active large-cap managers over the 25-year history of the SPIVA Scorecards. Stretch the time horizon further and the picture grows starker still: over 15 years, more than 90% of U.S. large-cap active equity funds have lagged the index, and over 20 years, roughly 92% of all domestic funds fell short of their benchmarks. Underperformance rates consistently rise as time horizons lengthen.

There are never any guarantees of future performance, of course. But the S&P 500’s long and consistent track record makes it about as reliable a foundation as an investor can find. For me, the odds strongly favoring a 10% average annual return are more compelling than chasing bigger wins while accepting a far greater risk of loss.

The Catch: Understanding Market-Cap Concentration

An S&P 500 ETF gives you a slice of 500 companies, but you are not invested in them equally. These funds are market-capitalization weighted, meaning the largest companies carry the heaviest weight. Today, mega-cap technology and artificial intelligence infrastructure stocks command a historically large share of the index, with information technology and communication services together accounting for nearly half of the entire fund’s movement. That kind of sector concentration is worth understanding before you commit a large portion of retirement savings to a single index.

To soften this concentration, investors seeking a smoother ride increasingly pair standard index funds with equal-weight ETFs, which give every company an identical 0.2% slice of the portfolio. Neither approach is objectively better, but knowing the distinction helps you build a portfolio that matches your actual risk tolerance rather than defaulting to whichever fund has the largest marketing budget.

2. Investing in ETFs means you don’t need a lot of specialized knowledge

I also lean on ETFs because I have no particular expertise in picking individual stocks. Poring over earnings reports, tracking changes in company leadership, or monitoring shifts in business strategy holds little appeal for me, even for companies I find genuinely interesting.

Selecting an ETF is far simpler. Most brokerage platforms include screening tools that let you filter by expense ratio, the sectors or industries covered, and historical performance. Finding the right fund takes a few minutes rather than hours of specialized research. That efficiency matters for investors who want to stay engaged without becoming full-time market watchers.

3. ETFs are a hands-off investment

ETFs also suit my personality because they require very little active management. An S&P 500 ETF spreads your money across companies in many different industries, delivering instant diversification in a single purchase. Because no single company dominates the outcome, you don’t need to monitor your holdings daily or react to every piece of corporate news. That kind of built-in calm carries real value for investors with a long time horizon who would rather not spend their weekends checking market news.

Beyond the S&P 500: Building a Modern ETF Toolkit

A core broad-market index fund makes a strong equity foundation, but the modern exchange-traded universe stretches well beyond large-cap domestic stocks. Investors can build a comprehensive asset strategy by layering in short-term Treasury funds for fixed-income stability, international equity funds for geographic diversification, and factor-based options like dividend growth funds to generate more stable cash flow and dampen overall volatility. Fixed income ETFs drew particularly robust demand in 2025, pulling in $458.63 billion globally, well above the $315.24 billion recorded in 2024. That surge reflects a growing recognition that ETFs can serve the full spectrum of an investor’s asset allocation, not just the equity sleeve.

Actively managed ETFs have also become a significant part of the landscape. Globally, active ETF assets reached a record $2.56 trillion by the end of June 2026, up 34% year-to-date, as investors increasingly use the ETF structure even when they want a manager making active stock selections. Year-to-date inflows into active ETFs hit $500.88 billion through June, more than double the previous full-year record. For passive-leaning investors like me, this development mainly reinforces the value of the ETF wrapper itself, regardless of whether the strategy inside it is active or index-based.

Are ETFs right for you?

ETFs clearly make sense for me, but whether they’re right for you depends on your goals. If you want a simple, low-maintenance portfolio with a strong historical track record, ETFs are likely the most efficient path. If you’re confident in your ability to research and select individual stocks that can consistently beat the market, a different approach may serve you better.

A Quick Checklist for Selecting Your First ETF

When you evaluate a fund using online screening tools, three details deserve the closest attention. First, check the expense ratio. Core index products typically range from 0.03% to 0.09% annually, and every basis point saved compounds meaningfully over time. Second, verify assets under management and average daily trading volume to confirm deep market liquidity and tight bid-ask spreads. Third, review historical tracking error to confirm the fund closely mirrors the returns of its target benchmark. A fund that consistently drifts from its index is not delivering what you’re paying for, even at a low stated cost.

Ultimately, your risk tolerance and long-term goals should drive every investment decision. A qualified financial advisor can help you work through those questions and identify the approach that fits your specific situation.

Editor’s note: This article was updated to reflect that global ETF assets reached a new record of $23.11 trillion at the end of July 2026, per ETFGI, with year-to-date inflows climbing to $1.71 trillion. The VOO AUM figure was also updated to reflect that the fund crossed the $1 trillion milestone on June 2, 2026, and now holds more than $1.5 trillion in net assets. Active ETF year-to-date inflows of $500.88 billion through June 2026, more than double the prior full-year record, were added for context.

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