When it comes to investing in exchange-traded funds (ETFs), investors have many choices. You can follow the latest artificial intelligence companies with an AI ETF, or even dip your toe into cryptocurrencies with a Bitcoin ETF.
But if you want an efficient and reliable way to follow the S&P 500 (SNPINDEX: ^GSPC), the Vanguard S&P 500 ETF (NYSEMKT: VOO) is one of the best places to put your money. You’ll not only spread your money across the 500 largest publicly traded companies in the U.S., but you’ll also pay minimum fees, and you can get started with this Vanguard ETF with as little as $1.
Here are a few reasons why putting $100 into the Vanguard S&P 500 ETF right now and holding it for the long term is a wise decision.
Vanguard is known for its low-cost funds, and the Vanguard S&P 500 ETF is no exception. You’ll pay an expense ratio of just 0.03%, which means for every $1,000 you have invested, you’ll pay only $0.30 in management fees.
Spending less on fees is a fantastic way to maximize your gains. Many actively managed funds charge much more and may not even earn you better gains over the long term. In fact, the latest Morningstar data shows that most passively managed funds outperform actively managed funds over a decade.
As the name suggests, Vanguard’s S&P 500 ETF follows the S&P 500. You’ll be invested in 500 of the largest publicly traded companies. This reduces the pressure of finding the hottest stock to buy or looking for the next big trend to invest in.
Instead, you’ll benefit from the S&P 500’s long-term potential. The S&P 500 has had a historical annual rate of return of 10.1% since 1957 (not adjusted for inflation). There’s no guarantee it’ll keep up that trend, but with such a large mix of companies within the index, there’s a good chance your investment will grow over time as it benefits from the growth of so many companies.
This is one of the biggest appeals of an S&P 500 ETF, because you get the benefits of investing your money without having to commit substantial time and energy to finding individual stocks.
One of the most difficult things about investing is spreading your money across different companies and opportunities. This helps protect your investments in case a company never reaches its full potential or a long-term trend fizzles out.
You won’t have to worry about that so much with Vanguard’s S&P 500 ETF. Since your money is diversified across many companies, if the economy and the market in general are doing well, the ETF will likely be gaining too.
