Navigating Investment Choices Amid Market Uncertainty

As the stock market continues to fluctuate and remains below its previous highs, many investors find themselves at a crossroads. Historically, tariffs have posed challenges for the stock market, with the ultimate effects depending greatly on the magnitude of the tariffs and the broader economic context. President Donald Trump’s recent pause on tariffs for 90 days, excluding China, adds another layer of complexity to the investment landscape.

In the aftermath of significant market declines, such as the recent S&P 500 drop of more than 10% within two days, stocks often experience continued pressure in the months that follow. For instance, the S&P 500 index surged 9.5% on April 9, yet this does not confirm a definitive market bottom. Historical data reveal similar patterns; the index rose by 11.6% on October 13, 2008, only to continue its descent, reaching even lower levels by March 2009.

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Strategic Investment Approach: Dollar-Cost Averaging

Given the prevailing market uncertainty, one prudent strategy remains: dollar-cost averaging into exchange-traded funds (ETFs). This method involves purchasing the ETF at predetermined intervals and amounts, irrespective of its price, minimizing the impact of volatility. In a declining market, a modified approach involves increasing investment amounts during considerable dips. Consistency over the long term is crucial.

Let’s examine two index ETFs where you can begin this investment strategy today. You can easily start with an initial amount, such as $500, and aim to invest regularly—ideally once or twice per month.

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Image source: Getty Images.

The Vanguard S&P 500 ETF

The Vanguard S&P 500 ETF (NYSEMKT: VOO) is a classic choice that tracks the S&P 500 index. This index includes approximately 500 of the largest companies listed in the U.S. by market capitalization. As a market-cap weighted index, it allocates a larger percentage to companies with a higher market cap (shares outstanding multiplied by price).

The advantage of the S&P 500 lies in its capacity to allow successful companies to flourish while diminishing the visibility of underperformers. Stock picking presents challenges; according to a JPMorgan study, 40% of the stocks in the Russell 3000 faced catastrophic losses of 70% or more from which they never recovered. Approximately two-thirds of stocks underperformed the index. However, broad-based market-weighted indexes, such as the S&P 500, tend to excel as they enable the most profitable companies to drive gains.

As a testament to this strategy, the Vanguard S&P 500 ETF has demonstrated a strong track record over the years, with its current holdings reflecting the most successful firms in the U.S. Here’s a listing of the ETF’s top holdings and their respective weightings, as of the end of February:

Holding	Weighting		Holding	Weighting
1. Apple	7.2%		6. Meta Platforms	2.9%
2. Nvidia	6.1%		7. Berkshire Hathaway	1.9%
3. Microsoft	5.8%		8. Broadcom	1.8%
4. Amazon	3.9%		9. Tesla	1.6%
5. Alphabet	3.6%		10. JPMorgan Chase	1.5%

Over the past decade, the ETF has delivered a total return of 223.7%, averaging an annualized return of 12.5% as of March’s end.

The Invesco QQQ ETF

For those seeking a more dynamic investment option, the Invesco QQQ ETF (NASDAQ: QQQ) is worth considering. This ETF tracks the performance of the Nasdaq-100 index, comprised of the 100 largest non-financial stocks traded on the Nasdaq exchange. Similar to the S&P 500, it is also a market-weighted index.

The Invesco QQQ ETF has a stronger emphasis on growth and technology stocks, with nearly 60% of its holdings in the technology sector and around 20% in consumer discretionary. Some of its top holdings are also found in the Vanguard S&P 500 ETF.

Here’s a summary of the Invesco QQQ ETF’s top holdings and their respective weightings, as of April 9, 2025:

Holding	Weighting		Holding	Weighting
1. Apple	8.5%		6. Broadcom	4.1%
2. Microsoft	8.2%		7. Meta Platforms	3.6%
3. Nvidia	7.9%		8. Costco Wholesale	3%
4. Amazon	5.7%		9. Netflix	2.8%
5. Alphabet	5.1%		10. Tesla	2.8%

The Invesco QQQ ETF has outperformed the S&P 500 over various timeframes, achieving a cumulative return of 380.2% over the past decade as of March’s end. Additionally, it has surpassed the S&P 500 in 87% of the rolling 12-month averages during that period.

While this ETF comes with higher risk due to its growth stock concentration, its impressive performance history cannot be overlooked.

Is Investing $1,000 in Vanguard S&P 500 ETF Worth It?

Before deciding to purchase Stock in the Vanguard S&P 500 ETF, consider the following:

The Motley Fool Stock Advisor analyst team has identified what they believe are the 10 best stocks for current investment opportunities, and notably, the Vanguard S&P 500 ETF does not feature on that list. The stocks selected have significant potential for substantial returns in the coming years.

For instance, Netflix was highlighted in December…