There are a lot of great exchange-traded funds (ETFs) out there these days, tracking everything from major indexes to niches, including artificial intelligence ETFs.
But if I had $1,000 to put toward just one ETF right now, I wouldn’t hesitate to put it toward the Vanguard S&P 500 ETF (VOO +0.45%). The benefits of a low-cost fund, spreading my money across all market sectors, and experiencing the long-term gains generated by the S&P 500 are just too good to pass up.
This Vanguard ETF is my largest holding right now, and it’s where I’d start if I had only $1,000 to invest. Here’s why.
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I’d put $1,000 toward the Vanguard S&P 500, no questions asked
Index funds like the Vanguard S&P 500 spread your money across the largest 500 publicly traded companies in the U.S., giving your portfolio exposure to tech companies, consumer goods stocks, industrial and energy companies, and more.
This built-in diversification means you don’t have to worry about whether your investments are tapping into long-term trends or emerging technologies. If the broad market is doing well, your investment will be doing well, too.
In addition to the diversification, the S&P 500 also has an impressive record of success. Since 1957, the index has had a historical annual average return of about 10%. You’re not guaranteed returns like that every year, of course, and some years you’ll likely have negative returns.
Still, there are significant benefits to keeping your money invested through the market’s ups and downs. Consider that the best days in the S&P 500 are often preceded by its worst days.
J.P. Morgan research shows that over the past 20 years, seven of the market’s 10 best days occurred within two weeks of the 10 worst days.
Today’s Change
(0.45%) $3.13
Current Price
$703.41
Key Data Points
AUM
$1.7T
Dividend Yield
1.04%
Expense Ratio
0.03%
Top Holdings
NVDA
7.55%
AAPL
7.05%
MSFT
5.36%
The analysis showed that a $10,000 initial investment in the S&P 500 over 20 years could be worth $71,750. But if you had missed the 10 best days of the market over those two decades, your returns would drop more than half.
In short, trying to time the market can be disastrous for your returns, and keeping your money invested in the S&P 500 through both good times and bad is your best bet to maximize them.
Why now is a good time to buy the Vanguard S&P 500 fund
Stocks can always be volatile, and there’s no guarantee of returns, but picking winners right now can seem especially difficult.
AI stocks have been huge winners, but there are increasing worries that tech companies are overspending on AI infrastructure that won’t translate into profits. What’s more, rising inflation, the conflict with Iran, a trade war with Canada, and a slowing job market are macroeconomic threats that could weigh down stocks.
If significant market volatility is ahead, putting $1,000 into the Vanguard S&P 500 will allow you to spread your money across many sectors — and give your portfolio an easy way to rebound when the eventual turnaround comes.
