It doesn’t circumvent the fact that most shares responded strongly to President Trump’s recent tariff announcement. Due to volatility in the market in early April, S&P 500including a 9.5% spike in one day after the previous four trading sessions reduced by 12%.
Unfortunately, market instability could increase as countries and businesses navigate the current tariff situation and decide how it will affect them and the economy.
Confusion is understandably true, many people wonder where to put more than $500 right now. Why invest? Vanguard S&P 500 ETF (voo 0.12%)) It could be a wise long-term move.
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The S&P 500 has proven to be a great place for your money in the long term
If you invest your money in the stock market, there is no guarantee that you will win a return. However, history shows that investing in the S&P 500 is a wise choice. Vanguard’s S&P 500 ETF tracks indexes and exposes them to the largest public companies in the US of 500.
The index is weighted towards technology stock, which accounts for approximately 30% of the fund’s distribution. However, even as they leaned towards those large tech companies, there is still substantial diversification in many sectors and companies, including the financial sector, healthcare, consumer goods, and energy.
The long-term benefits of this can be seen from the historic S&P 500 profits, which on average are around 10% per year (not adjusting for inflation). Of course, one year is much better and some people can suffer losses. However, over time, the market has consistently risen.
An additional benefit of Vanguard’s S&P 500 ETF is that you charge a very low fee to invest your money. The fund’s expense ratio is only 0.03%. This means you’ll pay just $0.30 for every $1,000 you invest.
The fund’s stocks are currently under $500, making it a great place to invest that amount. If you have a brokerage company that can buy fractional shares, you can make even smaller investments.
There is no tariff-based shift strategy
President Trump’s tariff development over the past few weeks has been a chaotic one. Companies in all sectors are still trying to determine what impact they have on their businesses. The tariff percentage is still in liquidity, with some products temporarily exempt while new things are threatened, all of which create very uncertain times for businesses.
Vanguard’s S&P 500 ETF cannot protect your investment from volatility caused by tariffs, but can be ignored to some extent. By spreading investments to a wider market, there’s no need to choose a company that can survive tariff disruptions.
Instead, when the market returns to some normality, you can get some comfort in the idea that your diversified investments have an opportunity to grow no matter which sector or company is doing well.
Please keep this in mind
There are still many unknowns that come with tariffs and how they affect the economy. Now, they are growing sentiment that it could spur the recession, with dozens of economists saying there is a 47% chance that this year. CEOs are also feeling pessimistic, indicating that around 60% of recent data believe a recession will occur in the next six months.
Because of this uncertainty, the S&P 500 could become volatile for some time, and some of the profits made over the past few years may not be the norm in the short term. If you have a long investment period, that’s not a big deal, but it’s worth keeping in mind as companies try to adapt to changes in their tariff policies.
Chris Neger holds the role of the Vanguard S&P 500 ETF. Motley Fool has posted and recommended positions on the Vanguard S&P 500 ETF. Motley Fools have a disclosure policy.
