The Vanguard ETF That Could Set You Up for Life if You Buy It Today
Consistency can do a lot of the heavy lifting for you.
By Stefon Walters
One of the easiest ways to invest is through ETFs because they cover a lot of ground at once, in most cases. You might not see three- to-four-digit short-term percentage growth as we've seen from some tech and growth stocks, but you also don't take on as much risk when you invest in broad ETFs.
Investing in ETFs doesn't have to mean growing your money slowly, either. Plenty of ETFs have shown they can provide attractive returns and set you up for life. One of those is the Vanguard S&P 500 ETF (VOO 1.42%). If you're looking for a staple for your portfolio, look no further than VOO.
Banking on a growing U.S. economy
VOO mirrors the S&P 500 index (^GSPC 1.44%), which tracks around 500 of the largest publicly traded American companies. Although it holds only large-cap companies, investing in VOO is essentially banking on U.S. economic growth. Nothing is guaranteed, but that has been one of the safer -- and more lucrative -- bets you can make in the stock market.
Since VOO began trading in September 2010, it has averaged nearly 13% annual returns. That average likely isn't sustainable over the long run, so let's assume it averages 10%, which is close to the S&P 500's long-term average. Here's roughly how much different monthly investments would grow in 20 years at that average:
Table by author. Investment totals account for VOO's 0.03% expense ratio and are rounded down to the nearest hundred.
Past performance doesn't guarantee future performance, but there's no reason to believe the S&P 500 won't continue to deliver attractive long-term results, given the companies leading the way.
The investment one-stop shop
VOO has become tech-heavy in the past few years (38.6% of the ETF), but it still covers a lot of ground, holding top companies from all major sectors. Whether it's the "Magnificent Seven" stocks, JPMorgan Chase and Visa in financials, Walmart and Costco in consumer staples, UnitedHealth Group and Eli Lilly in healthcare, there are lots of heavyweights in VOO, to which you get instant exposure with a single investment.
There will inevitably be ups and downs along the way, but the S&P 500 has shown time and again that it can withstand even the worst economic conditions. It has bounced back -- and been lucrative -- since every U.S. recession.
^SPX data by YCharts. Grey vertical bars represent U.S. recessions.
If you're looking for an investment that can set you up for life, sustainability should be high on the priority list. That's what you get with VOO. Many people have become very well-off by simply dollar-cost averaging into an S&P 500 ETF and letting time do its job.