When the market is on a tear, it's tempting to sit back and wait for a pullback. But smart investors know that the best strategy isn't timing the market -- it's time in the market.
The market hitting new highs actually isn't uncommon. In fact, a J.P. Morgan study found that since 1950, the S&P 500 hit a new high on about 7% of its trading days. Meanwhile, on nearly a third of the days it hit a new high, it never traded below that price again.
That's why dollar-cost averaging is so important. And one of the best investment vehicles to use this strategy with is exchange-traded funds (ETFs). By consistently investing in high-quality ETFs, regardless of market swings, you give yourself the best shot at building serious long-term wealth.
With some of the lowest expenses in the industry, Vanguard ETFs are a no-brainer place to start. Let's look at three Vanguard ETFs to begin buying into for the long term.
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1. Vanguard S&P 500 ETF
If you're going to own just one ETF, the Vanguard S&P 500 ETF (VOO -0.08%) is the one. The ETF gives you instant exposure to the 500 largest U.S. companies. That includes the biggest winners of the past decade, including Apple, Microsoft, Nvidia, Alphabet, and Amazon. These five stocks alone make up nearly 25% of the index.
What makes this ETF such a great core holding is how it adapts over time. When winners emerge, they just become a larger part of the index. The index leans into the Darwinian principle of survival of the fittest, letting the strongest stocks lead the way higher while laggards fall by the wayside.
This investment mechanism works and is backed by the Vanguard S&P 500 ETF's strong track record of returns. Over the past 10 years, the ETF has generated an average annual return of 13.6% -- a period that has included both strong bull and bear markets along the way.
As an added bonus, the ETF's expense ratio is just 0.03%. This means most of the index's returns stay in your pocket. If your goal is to build long-term wealth, you won't find a more efficient or reliable option.
2. Vanguard Growth ETF
For investors who want more exposure to the market's top growth stocks, the Vanguard Growth ETF (VUG 0.01%) is a great option. This ETF focuses on large-cap companies with strong earnings and sales growth, and that naturally skews the portfolio toward tech and consumer names. While it officially tracks the CRSP US Large Cap Growth Index, this is essentially the growth side of the S&P 500.
The ETF holds about 165 stocks, so you're still getting diversification, but it's solely focused on large-cap growth stocks. It has many of the same top holdings as the Vanguard S&P 500 ETF, but in a higher concentration. For example, while Nvidia represented a 7.3% position in the Vanguard S&P 500 ETF at the end of June, it was an 11.6% holding in the Vanguard Growth ETF.
With growth outperforming value for a long stretch over the past couple of decades, this ETF has been a strong performer. It has produced an annual average return of 16.2% the past 10 years. That outpaces the broader market and gives you more upside if big tech and other growth leaders keep running. With an expense ratio of 0.04%, it's a cheap way to invest in large-cap growth stocks without having to pick individual names.
If you want to lean into growth, this is a great way to do it.
3. Vanguard Information Technology ETF
If you want to go even deeper into tech, the Vanguard Information Technology ETF (VGT -0.06%) gives you a more concentrated portfolio of the companies helping shape the future. The ETF owns the top players in semiconductors, software, cloud computing, and most importantly, artificial intelligence (AI). With AI changing the world we live in, this is a great way to invest in this trend.
The portfolio is top-heavy, with Apple, Nvidia, and Microsoft making up nearly 45% of its holdings as of the end of June. But the ETF also gives investors exposure to companies like Broadcom, Palantir Technologies, and Advanced Micro Devices in its top-10 holdings, as well. These are some of the top companies that have been leading the charge with AI.
Meanwhile, the ETF's performance has been nothing short of exceptional. Over the past 10 years, it's generated an average return of 21.4% annually. It also has a low expense ratio of just 0.09%. Given its top heaviness and lack of diversification, this would not be the only ETF I'd own, but it's a great way to help potentially juice your returns and beat the market.
Overall, this ETF is for investors who believe the technology tailwinds, especially around AI, aren't slowing down anytime soon.
