Title: The Intelligent Vanguard ETF to Invest in With $500 Today
Investing can be daunting, with a plethora of metrics and jargon to decipher and conflicting opinions regarding individual stocks. For beginners, this complexity can make deciding where to start a challenging endeavor. Nevertheless, investing in stocks remains one of the most potent methods to build wealth over the long term.
Instead of venturing into the labyrinth of individual stock selection, a smarter option for new investors is to embrace exchange-traded funds (ETFs). ETFs offer instant diversification, allowing novices to bypass the anxiety of determining when to buy or sell individual shares.
One promising ETF platform to explore is Vanguard, renowned for its index funds and low fees. Since fees can significantly impact investment performance over the long term, Vanguard's minimal expense ratios make it a compelling choice.
When starting out, consider the Vanguard S&P 500 ETF (VOO). Its 0.14% expense ratio and status as a core holding for investors of all levels of experience make it an attractive choice. As a broad market-weighted index, VOO tracks the performance of the S&P 500, which contains approximately 500 of the largest U.S. companies.
Market-weighted indices like VOO offer a distinctive advantage by giving more significant weight to companies with higher market caps. This approach has contributed to the S&P 500's historical strength, as companies that grow and become successful become increasingly prominent in the index.
Contrary to popular investing approaches, the S&P 500 allows winners to flourish into megawinners, driving the index's impressive returns. In fact, a J.P. Morgan study revealed that among stocks in the Russell 3000, 40% suffered catastrophic losses between 1980 and 2020, while two-thirds of individual stocks underperformed the Russell 3000 during this period. This suggests that the S&P 500's gains stem from stocks outperforming significantly.
Vanguard S&P 500 ETF's long-term returns are noteworthy. From 2011 to 2021, the ETF generated an average annual return of 13.3%, resulting in a cumulative return of 249%. If you had invested $500 in VOO a decade ago, it would have grown to approximately $1,744.
Some investors may hesitate to invest in a market that's hitting all-time highs. However, recent research from J.P. Morgan suggests that investing in an S&P fund on days it hits all-time highs is just as effective, if not better, than picking any random day. A J.P. Morgan study revealed that investing in an S&P fund on all-time high days resulted in a 14.6% return after one year, compared to 11.7% when investing on random days.
Furthermore, the S&P 500 reaching new highs is not an uncommon occurrence, with the index hitting such milestones approximately 7% of the time since 1950. Additionally, the index has historically exhibited strong performance during bull markets, which can last up to 5.5 years on average.
In conclusion, the Vanguard S&P 500 ETF (VOO) offers numerous advantages and demonstrates strong long-term performance. Its low costs, high dividend yield, excellent diversification, and efficiency make it a well-rounded and reliable choice for investors. While it may seem counterintuitive to invest during market peaks, the historical data suggests that this is a viable option for beginners and seasoned investors alike.
To manage your money effectively when investing, focusing on low-cost ETFs like Vanguard's index funds can be beneficial. Vanguard's minimal expense ratios can significantly impact your investment performance over the long term.
Whether you're a beginner or an experienced investor, the Vanguard S&P 500 ETF (VOO) is an attractive choice due to its low expense ratio and status as a core holding in various investment portfolios.
