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 a record $19.85 trillion at the end of 2025, then surged further to a new record of $23.09 trillion by the close of June 2026, a 16% increase in just six months, according to ETFGI. 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 companies in the U.S. The Vanguard S&P 500 ETF (NYSEARCA:VOO), the largest ETF by assets with more than $839 billion in AUM as of year-end 2025, is one popular way 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. The long-term picture is even more striking: over a 15-year horizon, more than 90% of U.S. large-cap active equity funds have lagged the index, and over a 20-year period, 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. Your retirement savings end up highly tethered to a single sector cluster, which is worth understanding before you commit.

To mitigate 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.

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, which 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 peace of mind carries real value for long-term investors.

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.

It’s also worth noting that actively managed ETFs have 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. 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 make sure 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 climbed to a new record of $23.09 trillion at the end of June 2026, up 16% from the $19.85 trillion recorded at year-end 2025. U.S. net ETF inflows for 2025 were refined to approximately $1.49 trillion per FactSet data, the 20-year SPIVA underperformance figure of 92% for domestic funds was added alongside the existing 15-year figure, and new context on actively managed ETFs reaching $2.56 trillion in global assets by mid-2026 was incorporated.

Contact [email protected] for any questions or corrections.