Best ETF for Roth IRA

A common search string that is used to find my website is the phrase "Best ETF for Roth IRA". In service to those readers who are searching for the simplest long-term Roth IRA portfolio possible, I thought I would give a quick and dirty answer to the question: "If you could invest in just one ETF, what would it be?"

If I had to invest my entire long-term investment account in a single fund, it would unquestionably be SPY, which is an Exchange Traded Fund that mirrors the S&P 500 stock index. Since the stock market as a whole has a steady long-term uptrend, despite the ups and downs of the short-term market, it makes sense to ensure a healthy return for one's retirement without having to worry about the luck factor when picking individual stocks or more specialized funds. A quick look at the historical chart for the S&P 500 Index from 1960 to 2006 will illustrate this point:

Although I recommend having a slightly more diversified portfolio with access to a small-cap fund such as the Russell 2000 index (IWM) and an international index fund (EFA), were I to pick a single fund to put all of my eggs in one basket, it would unquestionably an S&P 500 index fund such as SPY.

I hope this is helpful for you readers who are looking for a quick and easy ETF portfolio for your Roth IRA. Of course, if you are closer to retirement, you would instead place a higher percentage of your portfolio into more conservative investments. But if you are decades away from retirement, you should enjoy the higher returns of stocks versus bonds and have nearly all of your portfolio in a broad market index fund (or funds).