2 Vanguard ETFs to Buy With $100 and Hold Forever
Key Points
The Vanguard S&P 500 Growth Index ETF tracks the movements of more than 200 growth stocks.
You can instantly diversify across the U.S. economy with the Vanguard S&P 500 ETF.
Both are great long-term investment options, and each one charges a low annual fee.
Exchange-traded funds (ETFs) are popular investment vehicles because they're easy to buy and sell, they give you exposure to different companies, and many of them charge low expense ratios. Some of them have even put up very impressive gains over time.
If you're looking for one or two ETFs to buy right now, you'd be hard pressed to find better ones than the Vanguard S&P 500 ETF (NYSEMKT: VOO) and the Vanguard S&P 500 Growth Index ETF (NYSEMKT: VOOG). Both funds cost more than $100, but you can buy fractional shares through many brokerages, making it easier than ever to get started. Here's why putting $100 toward each Vanguard ETF and holding forever is a smart move.
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Why buy the Vanguard S&P 500 Growth Index ETF now
As its name implies, the Vanguard S&P 500 Growth Index ETF focuses on growth stocks, specifically more than 200 of the top growth companies in the S&P 500.
The companies in the fund are picked based on their revenue and earnings growth, as well as their share price momentum. If that sounds too risky for you, consider that these companies all come from the S&P 500, so they're already some of the largest publicly traded U.S.-based companies.
Of course, the benefit of owning a fund that focuses on growth stocks is that when the market is experiencing big gains and the economy is on the right track, the Vanguard S&P 500 Growth Index ETF tends to benefit in big ways. Consider that the fund's total returns over the past 10 years are 340%, compared to the S&P 500's 261% increase.
There's gotta be a catch, right? Nope. At least not when it comes to the expense ratio. Vanguard charges just 0.07% annually to be invested in the fund, which is significantly cheaper than the industry average of 0.14%. This means for every $1,000 you have invested, you'll pay just $0.70 annually.
It's worth mentioning, too, that while returns of the Vanguard S&P 500 Growth Index ETF have been impressive over the past decade, there's no guarantee of future success. Growth stocks tend to underperform in recessions, but they also rebound faster when the economy turns around. All the more reason to take a buy-and-hold approach with this fund so you don't miss out on the large gains when they come.
Why the Vanguard S&P 500 ETF is an excellent choice as well
You might assume that if you want to ride the biggest trends in the market, like artificial intelligence, then you need to own growth stocks or a growth stocks fund. But that's not true because some of the largest companies in the S&P 500 have been the biggest beneficiaries of AI.
Consider that some top AI companies, including Nvidia and Broadcom, have soared 1,500% and 800% over the past five years, respectively, helping to push up the gains of the S&P 500. This is one of the reasons why owning the Vanguard S&P 500 ETF is so great. Your investment tracks the top 500 publicly traded companies in the U.S., giving you lots of diversification, but you're also benefiting from the most innovative companies in the country. As the legendary investor Warren Buffett put it so well in a 2021 investor letter, "Despite some severe interruptions, our country's economic progress has been breathtaking. Our unwavering conclusion: Never bet against America."
The result of betting on America is that the Vanguard S&P 500 ETF's total returns have doubled over the past five years, a very impressive return for a passively managed fund. And considering that Vanguard charges an expense ratio of just 0.03%, you'll pay just $0.30 annually for every $1,000 invested.
Personally, I like the idea of having my money spread out across many companies benefiting from the U.S. economy, which is why most of my portfolio is in this fund. Not only do I get to benefit from some big trends like AI, but I also sleep a little better at night knowing that I don't have all of my chips on just a handful of companies.
Whether you buy the Vanguard S&P 500 ETF or the Vanguard S&P 500 Growth Index ETF, or both, a $100 investment in these funds is a great way to diversify your investments and track some of the most innovative companies in the U.S. at the same time.
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Chris Neiger has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Nvidia and Vanguard S&P 500 ETF. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.