The Best ETFs to Invest $50,000 in Right Now

Checklists are essential. Imagine grocery shopping without a list. Would you even know where to start?

The same is true of investing. It’s important to think about what’s needed before putting items in the cart.

So, let’s take things one step further and imagine how to construct a hypothetical $50,000 portfolio using only Vanguard exchange-traded funds (ETFs).

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Vanguard Information Technology ETF

The First ETF I’d select for my hypothetical portfolio is the Vanguard Information Technology ETF (VGT 1.18%).

The main reason I’m choosing this fund is its growth. Over the last 10 years, the fund has generated a compound annual growth rate (CAGR) of 20.6%. That’s nearly double the CAGR for the S&P 500 over the same period (12.8%). A $10,000 investment made in the fund in 2014 would have grown to almost $65,000 as of this writing.

As its name suggests, this fund focuses on information technology stocks. Indeed, nearly 50% of its holdings are concentrated in Microsoft, Apple, and Nvidia.

Data source: Vanguard Group.

Turning to fees, the fund charges an expense ratio of 0.10%. That’s quite affordable, as only $10 per year is collected in fees for every $10,000 invested.

The Vanguard Information Technology ETF offers fantastic growth and charges low fees, making it ideal for growth-oriented investors or those with longer time horizons. However, its high concentration in tech megacaps like Microsoft, Nvidia, and Apple means it lacks some diversification. For those reasons, I’m allocating $15,000, or 30%, to it in my hypothetical portfolio.

Vanguard Dividend Appreciation ETF

Next up is the Vanguard Dividend Appreciation ETF (VIG 1.23%).

This fund balances my hypothetical portfolio by bringing some income stocks to the party. The fund focuses on dividend-paying large-cap stocks, specifically those that make up the Nasdaq US Dividend Achievers Select Index. Many sectors are represented in its holdings, including technology (28%), finance (14%), and healthcare (11%).

Data source: Vanguard Group.

Overall, the fund has a current dividend yield of 1.8%. And while that is low compared to many income-oriented ETFs, this fund strikes a balance between income and growth that explains its outperformance versus many income-seeking ETFs over the last 10 years.

The fund has generated a CAGR of 11.4%, thanks to its considerable holdings in tech stocks like Apple and Microsoft, which do not pay huge dividends compared to many deep-value stocks. That rate of return compares favorably to many income-oriented ETFs, which have struggled to generate returns of more than 10% over the last decade.

As for fees, investors in this ETF pay only $6 per year for every $10,000 invested in the fund. That’s a very low fee, meaning investors keep more of their hard-earned returns, which is always a good thing.

The Vanguard Dividend Appreciation ETF makes the cut because it provides a decent dividend yield for the portfolio without sacrificing growth. That’s why I’m allocating $10,000 — 20% — to my hypothetical portfolio.

Vanguard Total Stock Market ETF

Last is the Vanguard Total Stock Market ETF (VTI 1.20%).

As the name suggests, this ETF is designed to replicate the performance of a much broader array of stocks — indeed, the entire stock market. Because of that, the fund’s performance is very similar to benchmark stock market indexes like the S&P 500.

In point of fact, this fund has a 10-year CAGR of 12.2%, versus 12.7% for the S&P 500.

So why would an investor choose this fund over an S&P 500 ETF like the SPDR S&P 500 Trust ETF?

The answer is portfolio construction.

For investors who already have large holdings in the largest tech stocks — Microsoft, Apple, and Nvidia, for example — adding an ETF that tracks the S&P 500 might further concentrate their holdings in the tech megacaps. And in my hypothetical portfolio, I’ve already added the Vanguard Information Technology ETF, which is quite tech-heavy.

The overall portfolio gains some much-needed diversification by adding the Total Stock Market ETF. That’s because even though the tech megacaps are still the largest individual holdings in this ETF, they’re less of the overall total when compared to S&P 500-tracking ETFs like the SPDR S&P 500 Trust ETF.

Data source: Vanguard Group.

What’s more, the ultra-low fee charged by this ETF — only $3 per year for every $10,000 invested — is a great value for long-term investors and will help my hypothetical portfolio by maximizing annual compounding.

For those reasons, I’m allocating 50%, or $25,000, of my hypothetical portfolio to the Vanguard Total Stock Market ETF.