The S&P 500 is the most widely followed index when compared to others like the Nasdaq Composite Index or the Dow Jones Industrial Average. That's because the investment community views it as a clear barometer to understand how the stock market is performing over any given period of time.
If you want exposure to this broad index, here's one S&P 500 exchange-traded fund (ETF) to buy with $1,000 and hold forever.
Offered by a reputable firm
Investors should look no further than the Vanguard S&P 500 ETF (NYSEMKT: VOO). As the name suggests, this is an ETF that tracks the performance of the S&P 500. Investors will gain exposure in their portfolios to 500 of the largest and most profitable companies based out of the U.S.
At a high level, owning the Vanguard S&P 500 ETF essentially means that you are betting on the ongoing growth and innovation of the American economy. That perspective has historically been a very lucrative one. "Never bet against America," the great Warren Buffett wrote in Berkshire Hathaway's 2021 shareholder letter.
Vanguard has been a leader in the investment management space since its founding in 1975. It currently has more than $9 trillion in assets under management. And the Vanguard S&P 500 ETF itself has $1.3 trillion in assets as of this writing. Investors can have some peace of mind knowing that their hard-earned savings are tied up with a reputable firm in the industry that many other investors trust with their own capital as well.
Performance and fees
It's hard not to come away impressed with the Vanguard S&P 500 ETF's performance. In the past decade, it has produced a total return of 249%. A $1,000 investment back then would be worth $3,490 today.
If we zoom out even further, the S&P 500 index has put up an average yearly gain of about 10%. So, if you invest $1,000 today and have a 30-year time horizon, you'd end up with almost $17,500. That's a great outcome for a passive investment vehicle.
The other thing worth noting is just how cost-effective the Vanguard S&P 500 ETF is. It carries a tiny expense ratio of 0.03%. This means that just $0.30 goes toward the annual fee on a $1,000 investment. That's hard to beat.
Besides such a solid rate of return in the past and a very low cost, the fact that this ETF requires almost zero effort on the part of investors is also a positive trait.
Buying at the highs
The Vanguard S&P 500 ETF has had a fantastic year, generating a total return of 23% through the first 10 months of 2024. It currently trades in record territory. Some more critical investors might be wondering if right now is a good time to put $1,000 to work in this popular ETF. The reasonable perspective is to believe that it's best to wait until there's a pullback before investing.
In theory, this sounds like a smart move. In practice, it's impossible to execute successfully. A study by JPMorgan Chase shows that if an investor had missed the 10 best days in the past 20 years, their yearly returns would have been nearly cut in half relative to the gains registered had they just stayed fully invested throughout. In other words, it's best not to try and time the market.
The takeaway is that investing $1,000 in the Vanguard S&P 500 ETF right now is still a good idea, provided that you have patience and a long-term outlook to benefit from the magic of compounding.
Should you invest $1,000 in Vanguard S&P 500 ETF right now?
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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, JPMorgan Chase, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
