Investing in ETFs: A Simple Approach
One of my preferred methods for investing in the stock market is through an Exchange Traded Fund (ETF). You know, it’s really straightforward. Rather than delving into extensive research on multiple individual companies, you can simply allocate your funds into a few ETFs that meet many of your investment criteria.
ETFs can offer immediate diversification, which is definitely a plus. When a fund consists of a broad range of companies—tens, hundreds, or even thousands—the impact of any poor performance from a single company is minimized on overall returns.
Vanguard, a well-respected player in the finance world, has a reputation for providing a wide variety of high-quality ETFs. If you find yourself with $1,000 to invest, think about these two options. They serve different purposes but could balance each other well in your portfolio.
The Vanguard S&P 500 ETF (ticker: NYSEMKT: VOO) holds the largest share in my portfolio. This is mainly because of its strong alignment with the U.S. economy. The S&P 500 index includes the largest publicly traded companies in the country, meaning as the economy grows, so does this index.
Investing in the Vanguard S&P 500 ETF means you’re backing some of the leading companies not just in America but globally. I really believe several blue-chip stocks in this index will excel in the long run.
It’s striking how certain technology firms have skyrocketed in market valuation recently. Thanks to the AI boom, this ETF has become more concentrated in its top holdings compared to earlier. However, it still boasts a mix of significant companies across all major sectors, from JP Morgan Chase and Visa in finance, to Exxon Mobil and Cisco in energy, and Amazon in consumer products. There are many others to consider.
Sure, the Vanguard S&P 500 ETF does go through its ups and downs (like all investments), but it’s been a solid long-term option, with an average annual return of over 12.7% since its debut in September 2010.
The expense ratio is impressively low at 0.03%, meaning you’d pay just $0.30 per year for every $1,000 you invest. That’s a pretty economical way to access a vast array of companies that drive the U.S. economy.
Another Solid Choice: Vanguard High Dividend Yield ETF
The Vanguard High Dividend Yield ETF (ticker: NYSEMKT: VYM) could be ideal if you’re after consistent income. As its name indicates, it emphasizes companies known for paying dividends, especially those that have a solid record of doing so.
This ETF isn’t as tech-heavy as the S&P 500, focusing instead on dividend reliability. As of the last quarter, the financial sector made up 21.6% of the ETF, followed by tech (13%), industrials (13%), healthcare (12.4%), and consumer goods (10.1%).
As of October 21, the dividend yield was around 2.5%, which is slightly under its 10-year average of 3% but still significantly higher than the current yield of the S&P 500.
Incorporating dividend ETFs into your strategy can be an effective way to create income and provide some stability during market fluctuations. Over the last decade, the price of this ETF has increased 112%, and if you reinvest dividends, the total return stands at roughly 190%.
It’s also important to note that while you can count on dividends, these payouts can vary. Each company decides when and how much to distribute, so changes occur. However, looking at the bigger picture, the Vanguard High Dividend Yield ETF has been steadily increasing its dividends over the years.
Before diving into the Vanguard S&P 500 ETF, keep in mind some insights.
The Motley Fool Stock Advisor has highlighted what they consider the 10 best stocks to buy right now, but the Vanguard S&P 500 ETF isn’t among them. These particular stocks have the potential to yield remarkable returns in the coming years.
For instance, had you invested in Netflix when it was first recommended, your $1,000 would now be worth $602,049! And with Nvidia, it could have grown to $1,105,092.
What’s compelling here is the Stock Advisor’s total average return of 1,028%, compared to just 190% for the S&P 500—a significant outperformance! So, don’t miss out on their latest top 10 list, curated for retail investors by fellow retail investors.
*Stock Advisor returns calculated as of October 20, 2025.
