Investing doesn’t have to be complicated. Sure, you can research stocks in-depth and buy potential winners. Many investors do and make a lot of money over the long run. However, you can also take a much easier path.
Exchange-traded funds (ETFs) offer a simple and convenient way to buy a broad basket of stocks. Vanguard markets a variety of ETFs with low annual costs. Here are three Vanguard ETFs to buy with $1,000 and hold forever.
Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »
There’s perhaps no other ETF more important to building a solid investment portfolio than the Vanguard S&P 500 ETF (NYSEMKT: VOO). You can buy one share of this ETF for roughly $550. With that money, you’ll gain part ownership in the 500 large U.S. companies that comprise the S&P 500 Index.
The beauty of this Vanguard tracking the S&P 500 is that the index is rebalanced regularly. Big winners such as Apple, Microsoft, Nvidia, Google parent Alphabet, and Amazon make up a larger percentage of the fund’s portfolio because of their size. Stocks that underperform for too long will be replaced.
Since its inception in September 2010, the Vanguard S&P 500 ETF has delivered an average annualized return of 14.52%. Over the last five years, it has grown by an annual average of 15.21%. Dividends help boost the ETF’s total returns.
Fees won’t take much of a bite out of your gains with this fund. Its annual expense ratio is a low 0.03% compared to an average of 0.78% for similar funds.
Consider taking another $112 or so of your initial $1,000 to scoop up a share of the Vanguard S&P Mid-Cap 400 ETF (NYSEMKT: IVOO). This ETF attempts to track the performance of the S&P MidCap 400 Index, which includes 400 mid-sized companies. Some of the members of this index have performed especially well over time and advanced into the S&P 500 Index.
Unlike the Vanguard S&P 500 ETF, no individual stock weighs especially heavily in the Vanguard S&P Mid-Cap 400 ETF. This Vanguard fund’s largest holding makes up only 0.71% of the total portfolio.
Vanguard launched its mid-cap ETF at the same time as it introduced its S&P 500 ETF in September 2010. Since then, the Vanguard S&P Mid-Cap 400 ETF has achieved an average annual return of 12.09%. Over the last five years, its average return has been 11.26%.
You’ll pay a slightly higher annual expense ratio of 0.1% with this Vanguard ETF. However, that’s still well below the average expense ratio of 0.89% for similar funds.
To round out your exposure to U.S. stocks, a little over $250 will buy you a share of the Vanguard Small-Cap ETF (NYSEMKT: VB). As its name indicates, this Vanguard ETF owns stakes in smaller companies.
The Vanguard Small-Cap ETF’s portfolio includes 1,384 stocks. None makes up more than 0.47% of the fund’s total portfolio. This diversification helps reduce the impact of the higher volatility associated with small-cap stocks.
Since its inception in January 2004, the Vanguard Small-Cap ETF has delivered an average annual return of 9.24%. Over the last five years, its average annual return has been 10.14%. These returns are lower than those of the Vanguard S&P 500 ETF and the Vanguard S&P Mid-Cap 400 ETF. However, over the long term small-cap stocks have outperformed other stocks.
The average expense ratio for similar small-cap ETFs is 0.99%. As usual, though, Vanguard handily beats its peers when it comes to cost. The annual expense ratio of the Vanguard Small-Cap ETF is only 0.05%.
Before you buy stock in Vanguard S&P 500 ETF, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard S&P 500 ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $908,737!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of November 11, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Alphabet, Amazon, Apple, Microsoft, and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, Nvidia, Vanguard Index Funds-Vanguard Small-Cap ETF, and Vanguard S&P 500 ETF. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
3 Vanguard ETFs to Buy With $1,000 and Hold Forever was originally published by The Motley Fool