The stock market has already taken investors for a ride in 2026. After a relatively calm first two months of the year, the S&P 500 fell 9% only to turn around and bounce 12% higher off the lows. The uncertain direction of the Iran war, inflation, and economic growth has most people focused on what might happen over the next few months, rather than the next few decades.
But real money can be made over the long term. By ignoring the short-term machinations of the market and focusing instead of investing in quality long-term narratives, investors can create wealth by letting the long-term power of compounding do its thing. There are two factors that I think are very important when investing for the long term — quality and value.
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The case for investing in high quality companies should be self-explanatory. These are the businesses backed by healthy cash flows and manageable debt levels, and that generate high returns on equity. In short, these are the successful companies that should be the cornerstone of most portfolios. The high-growth home run swings might be more exciting. But the companies that grow steadily over time are usually the ones that perform the best.
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Investing in undervalued companies provides the opportunity to buy companies at discount prices. Even if the company is only slightly undervalued, it can translate into above average returns over the long term if that value is unlocked. Some value stocks stay value stocks, but that also provides a degree of downside protection should the market turn lower.
With those things in mind, here are two ETFs that focus on these factors: one on quality stocks and one on value stocks. Given their stock selection strategies and long-term track records, both could be bought and held indefinitely.
The Schwab U.S. Dividend Equity ETF(NYSEMKT: SCHD) is one of the most popular dividend ETFs out there and for good reason. Its strategy targets stocks that represent the best combination of balance sheet quality, dividend growth, and high yield. This process has generated a strong track record of results, including a year-to-date return of 12.8%, the best among U.S. dividend ETFs.
This type of quality focus belongs as the cornerstone of a portfolio. Using something like the Vanguard Total Stock Market ETF(NYSEMKT: VTI) as your core position makes sense because it covers the entire U.S. equity market. But adding the Schwab U.S. Dividend Equity ETF around it adds an element of income growth and durability that can enhance long-term total returns.
The Avantis U.S. Small Cap Value ETF(NYSEMKT: AVUV) isn’t just a pure value fund, but that’s an important distinction in this space. One of the dangers of investing in small-cap value stocks is that a lot of them are cheap for a reason. They’re struggling to grow and their balance sheets aren’t in the best shape. This ETF addresses that by focusing on companies with higher profitability, cash flows, and revenue while maintaining a lower price-to-book (P/B) ratio.
Small caps, especially small-cap value stocks, are still deeply discounted. Since the market has largely ignored this group over the past decade, there’s additional value to unlock once the current downturn in the economy stabilizes and begins to climb higher.
Metric
SCHD
AVUV
Expense ratio
0.06%
0.25%
AUM
$87.6B
$25.4B
Dividend yield
3.3%
1%
5-year average annual return
8.4%
12.5%
Strategy
Large-cap dividend quality and yield
Small-cap value
Biggest sectors
Consumer staples (19%), Healthcare (19%), Energy (15%)
Financials (26%), Energy (19%), Consumer Discretionary (17%)
Data source: SCHD website, AVUV website.
You can immediately see that neither of these ETFs relies on a heavy tech sector allocation (both are less than 10%). That makes them great equity portfolio diversifiers and ideal for environments where tech is dominating the market. That’s what we’ve seen so far in 2026 and year-to-date returns have shown that.
If you look beyond the S&P 500, these two funds are great long-term holdings that can be bought and held forever. Investing $100 doesn’t seem like a big start, but it’s enough to gain exposure to a solid investment opportunity.
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David Dierking has positions in Vanguard Total Stock Market ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
