Best Low-Cost ETFs & Mutual Funds for Long-Term Investing: Vanguard 10-Year Study

When it comes to investing, one principle has stood the test of time: costs matter. High fees eat away at long-term returns, while low-cost investing strategies help wealth grow faster. According to Vanguard’s famous research and its ongoing 10-Year Study on low-cost investing, investors who stick with simple, low-cost funds often outperform those chasing expensive “hot” investments.

In 2025, this lesson is more relevant than ever. With markets becoming increasingly volatile and unpredictable, keeping costs low and investing for the long term may be the smartest move. In this article, we’ll break down the findings from Vanguard’s 10-year study, explain why low-cost investing works, and highlight the best ETFs and mutual funds for long-term wealth creation.

The Vanguard 10-Year Study: Key Insights

Vanguard, one of the world’s largest asset managers, has long championed the idea that low-cost index funds outperform most actively managed funds over the long run.

Here’s what the study found:

1.      Cost is the biggest predictor of returns – Funds with lower expense ratios consistently beat higher-cost funds in the same category.

2.      Active managers rarely outperform – Over a 10-year period, fewer than 20% of active funds outperformed their benchmarks after fees.

3.      Time in the market matters more than timing – Investors who stayed invested in low-cost funds built significantly more wealth than those who frequently switched strategies.

4.      Diversification reduces risk – Broad-based ETFs and index funds helped smooth volatility and delivered steadier returns.

👉 In short: The study confirms that staying invested in low-cost funds over long periods is one of the most reliable wealth-building strategies.

Why Low-Cost ETFs & Mutual Funds Work

1.      Compounding of Savings – A 1% difference in expense ratio may seem small, but over 30 years, it can mean tens of lakhs (or hundreds of thousands of dollars) lost to fees.

2.      Passive Advantage – Index-tracking ETFs and funds don’t try to beat the market, but they consistently match it, which is better than most active funds that fail after fees.

3.      Behavioral Edge – Low-cost investing encourages long-term discipline, avoiding panic-driven trades.

Best Low-Cost ETFs for Long-Term Investing (2025)

ETFs are known for low fees, tax efficiency, and transparency. Some of the best long-term low-cost ETFs include:

1. Vanguard S&P 500 ETF (VOO)

·         Tracks the S&P 500, giving exposure to 500 of the largest US companies.

·         Expense ratio: 0.03%.

·         Ideal for US and global investors seeking broad-market exposure.

2. Vanguard Total Stock Market ETF (VTI)

·         Covers the entire US stock market, including small-, mid-, and large-cap stocks.

·         Expense ratio: 0.03%.

·         Perfect for investors who want maximum diversification.

3. iShares Core MSCI Emerging Markets ETF (IEMG)

·         Provides exposure to emerging markets including India, China, and Brazil.

·         Expense ratio: 0.09%.

·         Good for global diversification and higher growth potential.

4. Nippon India ETF Nifty BeES (India)

·         One of India’s oldest and most popular index ETFs, tracking the Nifty 50.

·         Expense ratio: ~0.05%.

·         Simple, low-cost way for Indian investors to own top companies.

5. Motilal Oswal Nasdaq 100 ETF (India)

·         Tracks the Nasdaq 100 index, giving exposure to global tech giants like Apple, Microsoft, and Google.

·         Expense ratio: 0.13%.

·         Great for long-term investors seeking tech-driven growth.

Best Low-Cost Mutual Funds for Long-Term Investing (2025)

Mutual funds remain extremely popular for retail investors, especially through Systematic Investment Plans (SIPs) in India and retirement accounts in the US.

1. Vanguard 500 Index Fund Admiral Shares (VFIAX) – US

·         Mutual fund version of the S&P 500 ETF.

·         Expense ratio: 0.04%.

·         Long-term track record of outperforming most active US large-cap funds.

2. Vanguard Total International Stock Index Fund (VTIAX) – US

·         Covers global equities outside the US.

·         Expense ratio: 0.11%.

·         Strong diversification across Europe, Asia, and emerging markets.

3. SBI Nifty Index Fund (India)

·         Tracks the Nifty 50 index.

·         Expense ratio: ~0.15% (direct plan).

·         Ideal for Indian investors seeking low-cost index exposure.

4. UTI Nifty Next 50 Index Fund (India)

·         Tracks the Nifty Next 50 index — future potential large-cap leaders.

·         Expense ratio: ~0.20% (direct plan).

·         Slightly higher risk but strong long-term potential.

5. HDFC Index Sensex Fund (India)

·         Tracks the BSE Sensex 30.

·         Expense ratio: ~0.20%.

·         Suitable for investors who prefer Sensex-linked exposure.

ETFs vs Mutual Funds: Which is Better for Long-Term Investors?

Both ETFs and mutual funds can be excellent choices, depending on your style:

·         ETFs → Better for cost-conscious investors, intraday traders, and those who want flexibility.

·         Mutual Funds → Ideal for beginners, SIP investors, and retirement planners who prefer automated investing.

 

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