I'll get right to it. For new investors, there's simply no better way to start a portfolio than with a low-cost S&P 500 index fund like the Vanguard S&P 500 ETF (VOO -0.60%).

As the name implies, the fund invests your assets into all 500 companies that make up the benchmark large-cap stock index, with the goal of matching the long-term performance of the S&P 500.

Why am I suggesting Vanguard's version in particular? The answer is cost. All ETFs have investment fees, known as expense ratios, which are expressed as a percentage of the fund's assets on an annual basis. For example, a 1% expense ratio means that $10 out of every $1,000 you have in the fund will go toward management and other expenses this year.

Well, the Vanguard S&P 500 ETF has an expense ratio of just 0.03%. This means if you invest $1,000, your investment expenses for the year are just $0.30.

A bet on American business

As Warren Buffett has said, an investment in the S&P 500 is a bet on the long-term success of American business as a whole. It's a bet that has worked out quite well for hundreds of years, and there's absolutely no reason to believe the next 100 years will be any different. Not every individual company will do well, but as a group, large American corporations should continue to thrive. In fact, Buffett has gone so far as to say that a low-cost S&P 500 index fund like the Vanguard product is the best investment most people can make.

One common misconception is that investing in an S&P 500 ETF like this one is "boring" and not the best way to drive long-term returns in your portfolio. And to be fair, it might be boring in the sense that you don't need to keep up with company news or deal with any issues related to an individual business. But the return potential really isn't as boring as you might think.

Over long periods of time, the S&P 500 has averaged annual total returns of 9% to 10%, depending on the exact range you're looking at. Splitting the difference (9.5%), this means that a $1,000 investment could be expected to grow to about $6,140 after 20 years, $15,220 after 30 years, and $37,720 after 40 years. Now, imagine if you make $1,000 investments every few months along the way.

These are theoretical total returns. This assumes that you'll reinvest dividends (the ETF passes the stocks' dividends to its investors).

Of course, past performance doesn't guarantee future results. But over the long term, the historical reliability of the S&P 500 to create wealth speaks for itself.

Use this ETF as a base

I'm not suggesting that investors only buy the Vanguard S&P 500 ETF and nothing else. There are some excellent ETFs that allow you to invest in other sectors, indexes, and more.

However, a low-cost S&P 500 ETF can serve as a strong backbone for your portfolio, to which you can incrementally add other investments over time. And this ETF could be a great way to build long-term wealth and manage volatility in your portfolio and can be an excellent fit for any investor.