Investing Simplified: The Case for the Vanguard S&P 500 ETF

Imagine waking up to find $1,000 sitting on your kitchen table. After some thought, you decide that investing is the best way to use the money. But with so many options available, how do you choose?

Fortunately, there’s a straightforward strategy for those new to investing who prefer to keep it uncomplicated. Let’s explore this approach.

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The Simple Path to Investing

Investing can be a powerful means to accumulate wealth. However, “investing in the stock market” can take on many different forms. For instance, it might involve:

• Owning a single stock, like a company you work for
• Holding shares of prominent stocks like Apple, Tesla, and Nvidia
• Having a diversified portfolio of 25 or more stocks, a strategy recommended by The Motley Fool
• Investing in one or more exchange-traded funds (ETFs)

For anyone seeking simplicity in investing, I recommend starting with ETFs. Here’s why.

ETFs trade like stocks but function similarly to mutual funds. Managers create a collection of stocks, allowing investors to buy shares of the ETF and gain exposure to many different stocks all at once, requiring much less time and money than if they were to build the portfolio independently.

Additionally, many ETFs track major stock market indexes like the S&P 500 or Dow Jones Industrial Average. These indexes are often referenced as gauges of the economy’s performance and frequently appear in financial news.

For over a century, the S&P 500 has generated an approximate return of 10% annually. Consequently, an initial investment of $1,000 in the S&P 500 can grow to more than $17,000 over 30 years.

Exploring the Vanguard S&P 500 ETF

A straightforward ETF that can help new investors is the Vanguard S&P 500 ETF (NYSEMKT: VOO).

VOO Total Return Level data by YCharts

This fund follows the S&P 500, the most cited stock market index globally. Therefore, investing in this fund enables investors to essentially “invest in the stock market.” Its returns closely mirror those of the S&P 500.

While some may look for higher returns beyond those of the stock market, simpler investors may find this fund very appealing.

Moreover, this ETF boasts one of the lowest expense ratios in the industry at just 0.03%. This means that if you invest $10,000, you only pay $3 annually in fees, and for a $1,000 investment, that fee drops to a mere $0.30 per year.

Thus, investing can indeed be straightforward. For those who want a simple approach, particularly with index-tracking ETFs, options like the Vanguard S&P 500 ETF offer a solid opportunity for long-term growth.

Should You Invest $1,000 in the Vanguard S&P 500 ETF Today?

Before making your decision to invest in the Vanguard S&P 500 ETF, consider this:

The Motley Fool Stock Advisor team has recently identified their picks for the 10 best stocks investors should consider, and notably, Vanguard S&P 500 ETF is not on that list. These selected stocks might deliver exceptional returns in the future.

For example, if you had invested $1,000 in Nvidia when it first appeared on this list on April 15, 2005, you would now have $853,765!!*

Stock Advisor gives investors a clear strategy for success, which includes advice on portfolio building, analyst updates, and two new stock recommendations each month. Historically, this service has more than quadrupled the S&P 500 returns since 2002*.

See the 10 stocks »

*Stock Advisor returns as of December 9, 2024

Jake Lerch has positions in Nvidia and Tesla. The Motley Fool has positions in and recommends Apple, Nvidia, Tesla, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.