Exchange-traded funds (ETFs) have been around for about three decades, but they've grown in popularity in recent years. They trade on the market, so they're much easier to invest in than traditional mutual funds, and they often come with low expense ratios instead of high management fees.
Vanguard is one of the top names in ETFs. All of its ETFs track an index, so they're passively managed and come with some of the lowest fees you can find. The Vanguard S&P 500 ETF (VOO -0.04%) and the Vanguard S&P 500 Growth ETF (VOOG -0.04%) are two excellent ETFs to invest in today. They offer value right now and for the long term.
Each one is a solid investment on its own, but they also complement each other. Let's take a closer look at both.
The full power of the market
It's a well-known aphorism that it's hard to beat the market. To add another cliche, if you can't beat 'em, join 'em. That's where investing in an index fund that tracks the S&P 500 comes in.
Many investors know about S&P Global's SPIVA scorecard, which measures how large-cap equity funds fare versus the S&P 500. The most recent data, for the first half of 2024, shows that 57% of these funds underperformed. That's not unusual.
If you believe in the U.S. economy, it makes a lot of sense to invest in the S&P 500, which is a selection of the top 500 stocks in the country. Even Warren Buffett, who has beaten the market by a wide margin over time, recommends investing in this type of index fund. Berkshire Hathaway, his holding company, owns two different ETFs that track the index, although they make up a small percentage of the company's portfolio.
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The S&P 500 changes every so often, switching out companies that don't meet its market capitalization threshold. Investing in this kind of instrument gives you the passive power of getting exposure to the best stocks without having to pick them yourself.
The Vanguard S&P 500 ETF is a great choice because it comes with the Vanguard name, and Vanguard has a long track record that leads to trust. It also has a low expense ratio of 0.03%, as compared to 0.77% for similar ETFs.
The S&P 500 is up 27% over the past year, and investing in this ETF is a no-brainer way to unlock the value of investing in the broader market.
The leading growth stocks on the market
The Vanguard S&P 500 Growth ETF takes the invest-in-the-market concept up a notch. Instead of the full scale of stocks in the S&P 500, this ETF invests in the S&P 500 Growth Index, which is about 200 stocks. That's still a good amount of diversification, but in terms of growth, it's the cream of the crop.
That has led to strong results over time, and the Growth ETF has outperformed the regular ETF in both the short term and the long term. It's up 38% over the past year, and that translates into an even wider margin since the ETFs were created.
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If you'd invested $10,000 in each of them 10 years ago, you'd have $6,880 more today from the Growth ETF. It still has the same trusted name and low fees as the regular Vanguard S&P 500 ETF, with an expense ratio of 0.1% versus 0.94% for similar ETFs.
There is more risk since there are fewer stocks, and it's growth-focused. That could work against you when the market prizes value over growth. But this isn't an ETF full of new, risky stocks. It's still anchored by the large, established companies that feature high up in the S&P 500, like Apple, Microsoft, and Nvidia.
If I had to choose one of these Vanguard ETFs, I'd choose the S&P 500 Growth ETF. But if you can invest in both, you're getting even more security while putting the growth ETF to work for your money.
