As the year comes to a close, it's time to start planning your investment strategy for 2023.
The stock market has been rough this year, which can make it a daunting time to invest. But this volatility will pass, and over the long term, it's extremely likely the market will see positive average returns. By investing now, you can take advantage of that rebound.
However, it's important to ensure you're investing in the right places. And there are three Vanguard ETFs I'm planning to load up on heading into 2023.
1. Vanguard S&P 500 ETF
The Vanguard S&P 500 ETF (VOO +0.42%) tracks the S&P 500 index. That means it includes roughly 500 stocks from some of the largest U.S. companies, spanning a wide variety of industries.
One of the best reasons to invest in an S&P 500 ETF is that it can help protect your money against volatility. While this investment isn't immune to stock market downturns, the S&P 500 itself has a decades-long history of recovering from even the worst crashes, bear markets, and recessions.
No matter what 2023 has in store for the market, an S&P 500 ETF is almost guaranteed to pull through.
2. Vanguard Russell 1000 Growth ETF
The Vanguard Russell 1000 Growth ETF (VONG +1.16%) includes 513 stocks with the potential for above-average growth. Close to half (42%) of the fund is tech stocks, and its three largest holdings include Apple, Microsoft, and Amazon.
There are advantages and disadvantages to investing in a growth ETF. The downside is that they tend to see more short-term volatility than broad-market funds, such as an S&P 500 ETF. Case in point: This ETF is down more than 26% this year, compared to the S&P 500's 17% drop.
However, growth ETFs also tend to see higher long-term returns, on average. In fact, this ETF is up nearly 349% since its inception in 2010, while the S&P 500 has only seen gains of around 247% in that time.
3. Vanguard Information Technology ETF
The Vanguard Information Technology ETF (VGT +0.66%) is a tech-focused fund that includes 367 stocks from various sectors within the technology industry. This ETF is the riskiest on the list, but it also has the most potential for rewards.
Tech stocks are generally higher risk (and more volatile) than stocks in other industries, but they also tend to see higher long-term returns. Because this fund focuses exclusively on the tech sector, there's less diversification -- which does increase your risk.
However, it's also earned the highest annualized returns of the three ETFs on this list. Over the last five years, it's earned an average rate of return of more than 16% per year -- compared to around 12.5% for the Russell 1000 Growth ETF and just over 10% for the S&P 500 ETF.
NYSEMKT: VGT
Key Data Points
Again, tech stocks can be more volatile in the short term, so expect to see more ups and downs in the future with this ETF. But if you're willing to hold your investment for several years, that patience could pay off.
Now may not seem like the ideal time to invest, with stock prices continuing to slide. But many of the strongest investments are on sale at the moment, making it a fantastic time to stock up. When the market eventually rebounds, you'll thank yourself for investing now.
