The Vanguard S&P 500 ETF and Vanguard Growth ETF are two top ETFs to begin investing in right now.
December is often a good month for stocks, so there is no time like the present to get into the market. But for investors who are just getting started with investing, jumping into the market near all-time highs could be nerve-racking.
Those fears also aren’t completely unfounded. Picking individual stocks is tough, and J.P. Morgan actually found that between 1980 and 2020, about 40% of stocks had negative returns. Meanwhile, only about 13% of actively managed funds run by professional investors have beaten the benchmark S&P 500 index over the past decade.
That said, these statistics shouldn’t keep you from investing. Instead, they should help guide how you invest. For the average person, the best way to start investing is through an exchange-traded fund (ETF). These ETFs can give you an instant portfolio of stocks that track the performance of a stock market index.
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However, to truly build wealth over time, investing in one or two index ETFs is just half the battle. Don’t worry, though, the second key to investing isn’t difficult. Instead of just buying an ETF and letting it sit, you’re going to want to employ what is called a dollar-cost averaging strategy. This is simply investing the same amount each month, regardless of how the market is performing, over a long period of time. This is important because when investors try to time the market, it often ends badly.
The market hitting all-time highs isn’t uncommon; it happens on about 7% of all trading days, so waiting for a pullback can lead to missed gains. Meanwhile, most of the market’s biggest gains often happen after large pullbacks, so you don’t want to stop investing during a bear market and miss out on the rebound.
Let’s look at two great Vanguard ETFs you can start buying right now and hold on to for the long term.
Vanguard S&P 500 ETF
If you can’t beat them, join them. As noted above, few actively managed funds outperform the S&P 500 index, so a simple strategy is to just invest in an ETF that mimics its performance. The Vanguard S&P 500 ETF (VOO +0.17%) is a great option given its low expense ratio (0.03%) and near-perfect correlation.
With an investment in this ETF, you’re getting an instant portfolio of approximately 500 of the largest U.S. companies. The S&P 500 is a market capitalization (market cap) weighted index, which means the larger a company is, the greater the percentage of the index it is, so bigger companies, such as Nvidia and Apple, have more influence on its performance than smaller companies.
Today’s Change
(0.17%) $1.06
Current Price
$626.58
Key Data Points
Market Cap
$0B
Day’s Range
$624.62 – $628.77
52wk Range
$442.80 – $634.13
Volume
11K
Avg Vol
0
Gross Margin
0.00%
Dividend Yield
N/A
The ETF has a strong track record, with an average annual return of 14.6% over the past decade and 17.6% over the past five years, as of the end of September.
Vanguard Growth ETF
Growth stocks have outperformed value stocks for much of the past 20 years, which is why the Vanguard Growth ETF (VUG +0.55%) is another great low-cost (0.04% expense ratio) option. It officially tracks the performance of an index called the CRSP US Large Cap Growth index, which is basically just the growth side of the S&P 500.
Like the S&P 500, this is a market cap weighted index; however, you’re getting a more concentrated portfolio. With this ETF, you’ll own 160 stocks in the S&P 500 that are considered growth stocks. As such, the fund is largely made up of stocks from the technology (63%) and consumer discretionary (18%) sectors.
Vanguard Index Funds – Vanguard Growth ETF
Today’s Change
(0.55%) $2.67
Current Price
$491.53
Key Data Points
Market Cap
$0B
Day’s Range
$489.60 – $494.16
52wk Range
$316.14 – $505.38
Volume
21
Avg Vol
0
Gross Margin
0.00%
Dividend Yield
N/A
Overall, the ETF has been a strong performer, with a yearly average return of 17.4% over the past 10 years and 18.4% over the past five years. If growth and artificial intelligence (AI) stocks are going to continue to lead the market higher over the next decade, this is a great ETF to buy and hold for the long term.