Since hitting a peak in January, the S&P 500 index has traded down, and is currently 14% off that record (as of April 22). President Donald Trump's economic policies, particularly around trade and tariffs, are causing a lot of uncertainty.
For individual investors, it can be scary to see the value of their portfolios declining. However, it's crucial to remain optimistic over the long term. Now might be a great time to put money to work.
The stock market is in the midst of a sell-off. The best investors should still consider buying my top Vanguard exchange-traded fund (ETF) with $2,000 right now.
A simple way to diversify
The S&P 500 is the most closely watched index for a good reason. This benchmark contains some of the largest companies in the U.S., and it represents about 80% of the total market value of all stocks that trade on exchanges in this country.
I view the Vanguard S&P 500 ETF (VOO 0.56%) as one of the best ways for investors to gain exposure to the performance of the S&P 500. It's a simple way to automatically diversify your portfolio.
The ETF contains businesses in every sector, ranging from communication services and consumer discretionary to real estate and utilities. And it has exposure to some of the most dominant companies.
The ETF is offered by Vanguard, a pioneer in the industry that's been around since 1975. With total assets under management of $10.4 trillion (as of Jan. 31), this is a very reputable company to entrust with your hard-earned savings.
Double-digit returns at a low cost
In 2023 and 2024, the S&P 500 produced a total return of 26% and 25%, respectively. These gains were fantastic, but investors shouldn't expect this type of performance to continue. Instead, it's more reasonable to assume that we'll see a reversion to the mean.
In the past decade, the Vanguard S&P 500 ETF has generated a total annualized return of 11.3%. If we zoom out even further, the S&P 500 has typically put up a 10% yearly return. Looking ahead, it's best to have a more tempered outlook, with a double-digit gain certainly in the cards.
NYSEMKT: VOO
Key Data Points
It's hard to complain about these kinds of results. Data shows that the vast majority of active fund managers, so-called professionals in the investment management industry, lose to the S&P 500 over an extended period. And in doing so, they still charge high fees to clients.
The Vanguard S&P 500 ETF is somewhat of a no-brainer investment option when viewed in this light. It carries a tiny expense ratio of 0.03%. On a $2,000 investment, only $0.60 goes to Vanguard to cover its overhead expenses. That's a great deal.
Keep the right mindset
There's a lot of fear right now among investors. No one is sure how the tariff situation will play out. And people are worried about a recession in the near future. It can make sense that investors would be hesitant to put money to work. However, it's important to always maintain a long-term mindset.
There have been numerous bear markets and corrections in the past. And every single time, the S&P 500 has ultimately recovered to reach a new high. The lesson for investors is to accept that drawdowns are normal. Moreover, the best times to invest are when everyone else seems to be running for the exits.
Investing $2,000 right now in the Vanguard S&P 500 ETF is a smart decision that will benefit you in the long run.
