With broad stock market indexes hovering near all-time highs, some investors may be concerned that a 2025 drop in stocks is on the horizon. After all, stock prices are outpacing earnings growth, making the market relatively expensive.
Valuation concerns could lead to lower stock prices in 2025, but that doesn't mean investors should stop selling positions or putting new money into the market. However, rather than chasing hot stocks to make a quick buck, you should be very careful to invest in blue-chip companies whose profits grow over time to justify their valuations.
Exchange-traded funds (ETFs) are a great way to invest in the market while maintaining diversification. Investment management company Vanguard offers several low-cost ETFs covering a variety of themes and stock market sectors. Here's why: Vanguard Dividend Appreciation ETF (VIG -0.71%), Vanguard Communications ETF (VOX -1.12%),and Vanguard S&P 500 ETF (VOO -1.04%) Now it stands out as a bargain item.
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Increase passive income from dividend growing companies
The Vanguard Dividend Appreciation ETF focuses on companies that are well-positioned to continue increasing their dividends for years to come. Top holdings include: apple, broadcom, JP Morgan Chaseand microsoft. Apple and Microsoft have yields of less than 1%, but they have a track record of increasing dividends and buying back their own stock.
Many of the ETF's top holdings are well-known, industry-leading companies. The fund's focus on earnings growth makes it a good choice for investors interested in quality rather than bargain-priced high-yield stocks.
Indeed, many of the fund's top holdings are hovering near all-time highs, and their valuations are expanding. However, the fund is well diversified, with only 30.7% concentrated in the top 10 holdings, and no individual holdings represent more than 5% of the fund.
Vanguard Dividend Appreciation ETF has a yield of 1.7%. This isn't high-yield territory, but it's better than Vanguard's 1.2% dividend yield. S&P500.
Telecommunications sector offers a rare combination of growth and value
The Vanguard Communications ETF reflects the performance of the communications sector. The fund is up more than 35% since the beginning of the year, making it one of the best-performing Vanguard ETFs. Still, the stock remains a great value, as many telecom stocks have had impeccable earnings and cash flow growth.
meta platform, alphabetand Netflix Although generally considered to be a tech company, it is actually classified in the communications sector, making up 52.4% of the Vanguard Communications ETF. Top 10 holdings in the fund (including legacy media companies) walt disney and comcastas well as carriers verizon communications, T-Mobileand AT&Taccounting for 69.8% of the fund. This fund is concentrated in a small number of stocks, so it's not very diversified, so it's only worth buying if you have a strong belief in the top stocks, especially Meta and Alphabet.
Despite both companies hovering near all-time highs, Meta and Alphabet stand out as solid growth stocks to buy in 2025. As you can see from the graph below, both companies have reasonable forward price-to-earnings ratios. Especially compared to other supercap growth stocks.
TSLA PE Ratio (Futures) Depends on the data Y chart
Indeed, forward P/E ratios should be viewed with some skepticism, given that they are based on analyst consensus estimates of earnings over the next 12 months, and are subject to change depending on external factors, macroeconomic conditions, and company decisions. It may change significantly. Still, the fact that Meta and Alphabet are cheap relative to other mega-growth stocks, despite their large price increases over the past few years, is appealing to investors concerned about the valuations of tech-focused companies. It is a great option.
Given that Meta and Alphabet rely on advertising revenue, it's worth understanding that their revenue could take a hit during a general economic downturn. But those who believe that platforms like Alphabet Inc.'s Google and YouTube, or Meta Inc. Inc.'s Instagram, will continue to increase their market share in the advertising industry should buy and hold the Vanguard Communications ETF through a period of volatility. should consider doing so.
Plug-and-play tools to leverage your hard-earned savings
With $1.37 trillion in net assets, the Vanguard S&P 500 ETF is one of the largest S&P 500 index funds on the market. This fund has an expense ratio of just 0.03%, or $3 for every $10,000 invested. By comparison, the Vanguard Communications ETF has an expense ratio of 0.1% and the Vanguard Dividend Appreciation ETF has an expense ratio of 0.06%.
The Vanguard S&P 500 ETF mirrors the performance of the S&P 500. The S&P 500 has become more populated in recent years as large companies have gradually increased in value, outpacing the rise in other stocks in the index. The top 10 stocks in the S&P 500 are Apple; NvidiaMicrosoft, Amazon,Alphabet,Metaplatform, tesla, Berkshire HathawayBroadcom, and JPMorgan Chase now account for a whopping 36.2% of the total index.
Some investors may feel that there are better ways to put their capital to work than buying top growth stocks near their all-time highs, but as long as the company grows profits, over time It is important to understand that valuations can be reasonable. Most of today's top growth stocks are growing earnings and have a long path toward future earnings growth. So while top growth stocks may seem expensive right now and may produce terrible returns in the short term, they should still be good investments in the long term.
Therefore, those with a very long investment horizon should consider investing in an S&P 500 index fund.
Three ETFs centered on industry-leading companies
The Vanguard Appreciation ETF, Vanguard Communications ETF, and Vanguard S&P 500 ETF are all near all-time highs. However, all three funds focus on high-quality, industry-leading businesses, so they could still be worth buying even if there is a sell-off in 2025.
Even good companies can see their profits slow during a recession. However, large companies have many advantages during downturns, allowing them to gain market share, acquire companies cheaply, and continue to invest in research and development when competitors are struggling. Masu.
No one knows what the market will do in 2025, but investing in blue-chip companies or ETFs that hold blue-chip companies is the secret to building long-term wealth. Therefore, despite their strong gains in recent years, long-term investors should consider buying the Vanguard Applications ETF, Vanguard Communications ETF, and Vanguard S&P 500 ETF even if there is a market decline in 2025. be.
JPMorgan Chase is an advertising partner of Motley Fool Money. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool's board of directors. Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool's board of directors. Suzanne Frey, an Alphabet executive, is a member of the Motley Fool's board of directors. Daniel Felber has a position at Walt Disney. The Motley Fool has positions in Alphabet, Amazon, Apple, Berkshire Hathaway, JPMorgan Chase, Meta Platforms, Microsoft, Netflix, Nvidia, Tesla, Vanguard Dividend Appreciation ETF, Vanguard S&P 500 ETF, and Walt Disney. We recommend these. The Motley Fool recommends Broadcom, Comcast, T-Mobile US, and Verizon Communications and recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
