The S&P 500 has been in turmoil recently due to fears about President Donald Trump's steep tariffs. Some economists are growing increasingly concerned that the tariffs will cause the U.S. to slide into a recession, with J.P. Morgan recently raising the probability of one to 60% for this year.
Company executives are becoming increasingly concerned as well. A recent CNBC survey of CEOs found that 69% of respondents now believe a recession will occur, and more than half think it will be this year.
Even though President Trump just announced a 90-day pause on most tariffs, many investors may still be wondering where is a good place to put $500 or more right now? One possibility is an exchange-traded fund (ETF). Despite its recent drop, the Vanguard S&P 500 ETF (VOO 0.19%) is still a great investment over the long term. Here are three reasons to consider this ETF:
Image source: Getty Images.
1. You don't have to decipher tariffs
There's a difference between ignoring the problems of tariffs and deciding not to spend time deciphering which companies or sectors might escape them. As of now, there are so many countries that could be affected by tariffs, across nearly every business sector, that it's very difficult to parse out which companies might escape unscathed.
NYSEMKT: VOO
Key Data Points
If a trade war ensues between the U.S. and other countries, it will become even more complicated to figure out which stocks could be the best to own.
The Vanguard S&P 500 ETF tracks the S&P 500, which means your investment will be well-diversified across the largest 500 publicly traded U.S. companies. You don't have to get into the weeds of specific companies and the tariffs' implications for them. Instead, your money will grow when the market begins its turnaround.
2. If an economic slowdown happens, you'll be well-positioned for the rebound
I won't dismiss the recent market rout. It has been substantial, and it's important to note that it was completely avoidable.
But it's worth remembering in all of the frenzy that if a bear market sets in, which is defined by the market's decline of 20% from a recent high, the average length of one is about 19 months. Not only is that relatively short for most investing horizons, but the bounce after a bear market can also be very good. Bull markets tend to last 3.5 years on average with a median return of 87%.
Consider the S&P 500's gains after these events:
- A 96% total return in the two years after the COVID-19 crash.
- A 401% return two years after the dot-com bubble burst.
There's no guarantee that putting your money into the Vanguard S&P 500 ETF will produce similar results over the next few years, but I included these statistics as a reminder that even when market conditions turn dire, the situation eventually turns around.
Having your money in the Vanguard S&P 500 ETF will ensure you don't miss the S&P 500's comeback when it happens.
3. It's inexpensive and liquid
Two other very important reasons to own Vanguard's S&P 500 ETF are that you can easily sell your shares if you need the cash. You can buy and sell shares of your ETF in your brokerage account, just like you would any other stock, making it painless to move your money elsewhere if you need to.
You'll also pay a low expense ratio of just 0.03% annually to have your money in this Vanguard ETF. That's inexpensive by any comparison and far below the average active ETF fee of 0.69%.
You'll pay just $0.30 annually for every $1,000 you have in this ETF, compared to the average active ETF fee of $6.90 per $1,000.
More volatility ahead
No matter where your money is invested, it's likely to experience some significant swings as we try to figure out what's happening with tariffs and the U.S. economy. That's the bad news.
But the good news is that over time, the S&P 500 has a fantastic record of gains. Putting $500 or more into the Vanguard S&P 500 ETF now will most likely look like a wise decision many years from now.
