The one thing about hindsight is that it's always 20/20. You'd have difficulty finding someone who doesn't look back at some of their decisions and wish they would've gone another route. Investing is no exception to this, either.
I know there are investments I look back on and wish I made (or didn't make), and I'm sure countless investors would have similar thoughts. But you live, and you learn. However, if I were starting my investing journey in 2024, there's no question where I'd invest my first $1,000: the Vanguard S&P 500 ETF (VOO 1.00%).
One investment, hundreds of companies, minimal thinking required
The stock market has indexes that theoretically group companies by criteria to track their performance. The S&P 500 (^GSPC 1.02%) is the most popular of these indexes, tracking the largest 500 companies traded on the U.S. stock market. An investment in an S&P 500 exchange-traded fund (ETF) is like an investment in the broader U.S. economy, which is why I'd go with the Vanguard S&P 500 ETF.
Instead of individually investing in top companies like Apple, Tesla, Coca-Cola, and hundreds of other industry-leading companies, I would go the broad route and get exposure to them all with a single investment. You may not get the hypergrowth returns that could come from those companies individually, but you also don't have the risk that comes with individual companies. It's a good balance between the two.
When you're beginning your investing journey, sometimes the fewer choices you have to make or things you have to do, the better. The Vanguard S&P 500 ETF eliminates the need to research individual companies and allows you to take a passive approach. Most importantly, it allows you to get started, which can be the hardest part for investors.
It's hard to argue against the historical results
In 2023, the Vanguard S&P 500 ETF increased around 24%, reversing course from the 19% it lost in 2022.
In the past 10 years, the ETF has averaged close to 12% annual total returns. Past performance doesn't guarantee future performance, but if we assume this trend continues, here's how much a one-time $1,000 investment could grow in different years (not including fees):
| Years Invested | Investment Total |
|---|---|
| 20 | $9,600 |
| 25 | $17,000 |
| 30 | $29,900 |
| 35 | $52,800 |
| 40 | $93,000 |
Data source: Author's calculations. Values rounded to the nearest hundred.
The plan would be to make consistent investments, but the above table shows how a single invest-it-and-forget-it investment could pay off by simply letting time work its magic. Below is how much a one-time $1,000 investment and $500 monthly investments could grow to, using the Vanguard S&P 500 ETF's returns over the past decade:
| Years Invested | Investment Total |
|---|---|
| 20 | $442,000 |
| 25 | $817,000 |
| 30 | $1.47 million |
| 35 | $2.64 million |
| 40 | $4.69 million |
Data source: Author's calculations. Values rounded to the nearest hundred.
I don't want to harp too much on the specific numbers because those will vary with returns, but the S&P 500 has historically proven that it could be a reliable source for building long-term wealth.
A one-stop shop that's ideal for any investing level
Simplicity doesn't mean inferiority. There's a reason countless actively managed funds by Wall Street experts underperform the S&P 500 each year. Sometimes, it's best not to overthink it and stick with what's historically worked.
The Vanguard S&P 500 ETF is diverse, contains blue chip stocks, is low cost, and has stood the test of time. There's not much more I would ask for in an investment.
