The Best Long-Term Investments for Americans

Long-term investing success does not require identifying the next great company, predicting market movements, or working with an expensive financial advisor. It requires choosing investments with strong historical return records, holding them through inevitable volatility, and letting compound interest work over decades. The best long-term investments for most Americans share three properties: they have outpaced inflation historically, they are accessible through standard brokerage accounts without special qualifications, and they compound meaningfully over 10–30+ year holding periods.

This guide ranks and evaluates the top long-term investment options for American investors, including expected returns, appropriate account types, and the specific instruments that provide the cleanest exposure to each category.

Table of Contents

1. U.S. Stock Market Index Funds
2. International Stock Funds
3. Real Estate and REITs
4. Investment-Grade Bonds
5. Treasury Inflation-Protected Securities
6. The Roth IRA: The Best Account for Long-Term Wealth
7. What Long-Term Investors Should Avoid

U.S. Stock Market Index Funds

Historical average return: ~10% nominal annually (~7% real/inflation-adjusted)
Best instruments: VTI (0.03%), FZROX (0.00%), VOO (0.03%)
Best account: Roth IRA, 401(k), taxable brokerage

U.S. stock market index funds represent the single most important long-term investment available to most Americans. A century of data shows the U.S. stock market has delivered approximately 10% average annual nominal returns — the highest of any major asset class — and has recovered from every bear market to reach new highs. The returns are not smooth (the market falls 10%+ in most years at some point and 20%+ periodically), but the long-term compound effect is transformative.

A total market index fund like VTI or FZROX provides instant ownership of approximately 3,500–3,900 U.S. companies across every sector and size. This single fund captures the full breadth of American corporate earnings growth without requiring any security selection, market timing, or ongoing management. The 0.03% expense ratio means you keep 99.97% of your return each year — the only meaningful cost is the annual fee on the underlying fund expenses.

The most important behavioral requirement: hold through bear markets. Investors who sold during the 2008–2009 financial crisis (S&P 500 fell ~55%), the 2020 COVID crash (~34%), or the 2022 bear market (~19%) and did not re-invest before the recovery captured significantly less than the full decade returns. Staying invested through volatility is not a minor detail of U.S. stock market investing — it is the entire strategy.

International Stock Funds

Historical average return: ~7–9% nominal annually (varies by period and region)
Best instruments: VXUS (0.07%), FZILX (0.00%), VEA (0.05%)
Best account: Taxable brokerage (foreign tax credit benefit), Roth IRA

International stocks provide geographic diversification that U.S.-only portfolios lack. The U.S. represents approximately 60% of global market capitalization — a U.S.-only portfolio concentrates 100% of equity exposure in 60% of the world's investable market. Adding international exposure through VXUS (which covers developed and emerging markets ex-U.S.) provides access to thousands of companies across Europe, Japan, Canada, Australia, India, China, and dozens of other economies.

The diversification argument is evidence-based: there have been extended multi-year periods when international stocks significantly outperformed U.S. stocks. The 2000s (2000–2009) were a "lost decade" for U.S. stocks — the S&P 500 returned approximately zero — while international markets, particularly emerging markets, delivered substantial positive returns. Holding both reduces the risk that your entire equity portfolio suffers from U.S.-specific factors during any given decade.

The allocation range most commonly recommended is 20–40% of total equity exposure in international funds. A simple two-fund equity approach — 70% VTI + 30% VXUS — covers virtually every publicly traded company in the world at extremely low cost and requires no ongoing management beyond periodic rebalancing.

Real Estate and REITs

Historical average return: ~8–12% total return (REITs); varies widely for direct property
Best instruments: VNQ (0.12%), SCHH (0.07%); direct rental property
Best account: REITs in Roth IRA or 401(k); direct property in personal name or LLC

Real estate has been one of America's most reliable long-term wealth creators, particularly through direct property ownership with leverage. The U.S. has approximately 67 million homeowners who have benefited from both appreciation and the forced savings mechanism of mortgage principal paydown. Investment properties extend this model — a tenant's rent payments cover the mortgage while the property appreciates, creating equity growth from someone else's monthly payment.

For investors who prefer the simplicity of financial assets over physical property management, Real Estate Investment Trusts (REITs) provide diversified real estate exposure through standard brokerage accounts. The Vanguard Real Estate ETF (VNQ) holds 160+ REITs across apartment communities, data centers, cell towers, warehouses, and retail properties — instant real estate diversification available for the price of one ETF share.

REITs have delivered total returns (dividends plus price appreciation) competitive with the broader stock market over long periods, typically with yield components of 3.5–5%. The higher dividend yield makes REITs most efficient in tax-advantaged accounts (Roth IRA, 401k) where the dividend taxation issue is eliminated or deferred.

Investment-Grade Bonds

Historical average return: ~3–5% nominal annually
Best instruments: BND (0.03%), AGG (0.03%), individual Treasuries via TreasuryDirect
Best account: Traditional IRA, 401(k) (ordinary income treatment deferred)

Investment-grade bonds — U.S. Treasuries, agency bonds, and investment-grade corporate bonds — are not primarily wealth-building tools. Their historical returns (3–5% nominal) significantly lag equities (10%) over long periods. The value of bonds in a long-term portfolio is risk reduction and counter-cyclical behavior: bonds typically hold value or rise during equity bear markets, providing the portfolio stability that allows investors to hold their equity allocation through downturns without panic-selling.

The 60/40 portfolio (60% stocks, 40% bonds) has been the standard moderate allocation for decades precisely because the bond component makes the portfolio psychologically manageable for investors who would otherwise sell stocks at market lows. A 60/40 portfolio historically falls about half as much as a 100% stock portfolio during major market corrections, while still generating approximately 7–8% average annual returns over long periods.

The appropriate bond allocation depends on time horizon and risk tolerance. Very young investors (20s–30s) with 30+ year horizons can hold minimal bonds (5–15%) since time allows full recovery from equity drawdowns. Investors approaching retirement need more bonds (30–50%) to reduce the sequence-of-returns risk of a major equity decline coinciding with the early years of portfolio withdrawals.

Treasury Inflation-Protected Securities (TIPS)

Historical average return: ~1–3% real annually (by design — inflation plus real yield)
Best instruments: SCHP (0.03%), VTIP (0.04%), direct purchase via TreasuryDirect
Best account: Traditional IRA, 401(k) (eliminates phantom income taxation)

TIPS are the only U.S. government security that explicitly guarantees preservation of purchasing power. Their principal adjusts with the Consumer Price Index — when inflation rises, the principal increases; the coupon payments (a fixed percentage) are applied to the growing principal, ensuring income keeps pace with inflation.

TIPS are not a growth investment — they are an insurance policy against inflation eroding the real value of your fixed-income holdings. For retirees who depend on portfolio income, TIPS ensure that bond allocations maintain their real value and purchasing power through inflationary periods. During the 2021–2022 surge in inflation, nominal bonds suffered significant real losses while TIPS preserved purchasing power by design.

Holding TIPS in tax-advantaged accounts eliminates the "phantom income" problem where annual inflation adjustments to principal are taxable as ordinary income even though no cash is received until maturity.

The Roth IRA: The Best Account for Long-Term Wealth

The Roth IRA deserves special mention because it is not a specific investment — it is the account structure that makes virtually all long-term investments dramatically more valuable. Contributing to a Roth IRA and investing in U.S. stock market index funds creates tax-free growth on what may be your best-performing investment over the next 30–40 years.

The mathematics are compelling: $7,000 invested annually in a Roth IRA from age 25 to 65 at 8% average return accumulates approximately $1.9 million. In a taxable account with the same investments, annual dividend taxation and capital gains taxes on portfolio rebalancing could reduce the effective return by 0.3–0.8% annually — a difference that compounds to $300,000–$500,000 less in terminal wealth from the same investments in the wrong account type.

The Roth IRA's specific advantages for long-term investors: all qualified withdrawals in retirement are completely tax-free regardless of how large the account grows; no required minimum distributions during the owner's lifetime; contribution basis (the money you put in) can be withdrawn at any time without taxes or penalties for genuine emergencies; and inherited Roth IRAs transfer the tax-free benefit to heirs for the distribution period.

What Long-Term Investors Should Avoid

Understanding what to avoid is as important as understanding what to buy for long-term investors. Several common investment categories have produced poor long-term results for ordinary investors:

Actively managed funds with high expense ratios. Approximately 88–92% of active large-cap U.S. equity fund managers underperform the S&P 500 over 15-year periods after fees, according to the SPIVA scorecard. Paying 0.75–1.25% annually for management that underperforms a 0.03% index fund costs enormous wealth over 30 years. The default should always be the lowest-cost index fund available in any asset class.

Individual stock concentration. For most investors, 100% of a portfolio in 5–10 individual stocks represents uncompensated concentration risk. A single company can go bankrupt (Enron, Lehman Brothers, Sears) or simply stagnate for decades. Broad diversification through index funds eliminates company-specific risk entirely at near-zero cost.

Market timing strategies. Attempting to exit the market before downturns and re-enter before recoveries consistently produces worse results than simply staying invested. Missing just the 10 best trading days in any decade roughly halves the total return for that decade. The best days frequently occur during periods when anxiety about the market is highest — precisely when timing-focused investors are most likely to be in cash.

Annuities with high surrender charges and fees. Variable annuities sold as retirement planning solutions often carry expense ratios of 2–3% plus surrender charges of 5–10% for early exit. The tax deferral benefit, which is their primary selling point, is already available through 401(k)s and IRAs at virtually no cost. For most investors who have not maxed out available tax-advantaged accounts, an annuity makes no financial sense.

Speculative assets beyond a modest allocation. Cryptocurrency, meme stocks, special purpose acquisition companies (SPACs), and similar speculative instruments have produced extreme returns for some early holders and significant losses for most. For long-term wealth building, these are appropriate only as small satellite positions (1–5% of portfolio maximum) for investors who understand them fully — not as core holdings that compete with or replace diversified index funds.

The best long-term investments for most Americans are not exotic, complex, or exclusively available to the wealthy. Low-cost U.S. and international stock market index funds, accessed through Roth IRAs and employer 401(k)s, represent the most empirically supported path to long-term wealth accumulation available to ordinary investors. The sophistication required to execute this strategy is minimal; the patience and behavioral discipline required to maintain it through volatile markets over decades is the genuine challenge — and the genuine competitive advantage of investors who succeed.