These top-notch ETFs should be a go-to choice for almost every investor.
Exchange-traded funds (ETFs) can make life easy by simplifying the investment process. ETFs are buckets of individual companies traded under one ticker symbol, offering instant portfolio diversification. Some of them follow stock market indexes, while others reflect a specific theme or strategy.
Vanguard is one of the world’s largest investment companies. It’s a trusted name because shareholders don’t own the company; the investors who own its funds do. So, Vanguard is an excellent choice if you’re looking for exchange-traded funds to buy and hold forever.
Here are three Vanguard ETFs suited for different types of investors. Consider buying and holding them indefinitely; they would make a strong foundation for any long-term portfolio. You can buy a share of all three for under $1,500 or stick to the ETFs that resonate with your investing style.
1. The only Vanguard ETF Warren Buffett owns
World-renowned investor Warren Buffett is arguably one of the greatest stock pickers of all time. But he does own one Vanguard ETF: the Vanguard S&P 500 ETF (VOO -0.04%).
It follows the S&P 500, a market-cap-weighted index of 500 of America’s most prominent corporations. It’s probably the most famous stock market index and a common fill-in when investors refer to the U.S. market. You get a mix of investment exposure to almost every industry, including the “Magnificent Seven” technology stocks.
VOO total return price; data by YCharts.
The S&P 500 has proved to be a remarkably effective wealth generator. Since its modern format began trading in the 1950s, it has turned $100 into over $36,000 — without factoring in dividends. The index fluctuates in any given year, but it has averaged about 8% annualized total returns over the past five decades.
You can’t directly invest in the S&P 500, so consider Vanguard’s S&P 500 ETF instead.
2. A fantastic ETF for growth investors
Some investors might want more investment upside, even if it means more volatility. The Vanguard Growth ETF (VUG 0.18%) could be what you’re looking for. It follows the CRSP US Large Cap Growth Index, a basket of 181 large-cap growth stocks.
The fund leans more heavily into the Magnificent Seven than the S&P 500, with approximately 52% of its funds invested in this group. The other half is spread across 174 stocks, giving investors some built-in diversification.
VUG total return price; data by YCharts.
Buying and holding this fund has worked well over the years. Growth markets like artificial intelligence, cloud computing, semiconductors, and e-commerce should continue to drive performance in big technology, which bodes well for this ETF and its investors. Its 0.04% expense ratio is far lower than many other growth-focused ETFs.
The Vanguard Growth ETF is a proven winner if you’re comfortable with the fund’s heavy concentration in a small handful of large technology companies.
3. This ETF will pay you passive income
Some investors want to maximize share-price growth, while others want to earn passive income from their stocks. If you fall into the latter group, consider the Vanguard High Dividend Yield ETF (VYM -0.39%), which tracks the FTSE High Dividend Yield Index.
The ETF invests in 537 stocks, though you won’t find too many high-flying tech companies beyond Broadcom, which is currently the fund’s top holding.
Instead, count on mature blue chip companies with strong dividend track records — names like Home Depot, Procter & Gamble, Johnson & Johnson, and Chevron. The ETF pays a solid 2.6% dividend yield, while the fund’s underlying companies average 10% earnings growth. Those dividends should grow over time, creating a snowball of passive income.
The expense ratio is only 0.06%, a small price to pay for not having to manage a portfolio of over 500 dividend stocks.
VYM total return price; data by YCharts.
The ETF largely avoids the technology sector (under 10% exposure) and has lagged the broader market without that growth. But if steadily increasing dividends are your primary focus, it’s hard to go wrong with the Vanguard High Dividend Yield ETF.
Justin Pope has positions in Chevron and Johnson & Johnson. The Motley Fool has positions in and recommends Chevron, Home Depot, Vanguard Index Funds-Vanguard Growth ETF, Vanguard S&P 500 ETF, and Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool recommends Broadcom and Johnson & Johnson. The Motley Fool has a disclosure policy.
