With the stock market sitting near record highs, many investors may be tempted to wait for a pullback before buying any new shares. The problem is that waiting for a better price often backfires. A J.P. Morgan study last year found that since 1950, the S&P 500 has set new highs on about 7% of all trading days. And after nearly a third of those days, it never traded lower than that day's level again. In other words, if you wait, you risk missing some of the market's best gains.
A smarter strategy is dollar-cost averaging. By steadily putting more of your money to work, you take market timing out of the equation and give yourself more time to let compound growth do the heavy lifting. Even starting with $500 is enough to begin. The real key to success with this method is adding additional money to your portfolio regularly. And Vanguard's catalog is a great place to start since it has built a reputation as the low-cost fund leader.
These five Vanguard exchange-traded funds (ETFs) could serve as core holdings in your portfolio for decades.
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1. Vanguard S&P 500 ETF
The Vanguard S&P 500 ETF (VOO -0.45%) mirrors the S&P 500, giving investors exposure to 500 of the largest and most influential companies in the U.S. Its largest positions include market leaders like Nvidia, Microsoft, and Apple.
The index adjusts automatically as new leaders emerge, which makes the fund a great long-term investment vehicle. Over the past decade, the ETF has delivered average annualized returns of 13.6% through the end of July. That type of performance is hard to beat.
Its low cost is another big advantage. The ETF's expense ratio is only 0.03%, which means that for every $10,000 you have invested in it, you pay just $3 a year in fees. For investors looking to build wealth steadily through dollar-cost averaging, this ETF is one of your best options. If I could only pick one fund to hold for the next 30 years, this would be it.
2. Vanguard Growth ETF
For those who want more exposure to fast-growing companies, the Vanguard Growth ETF (VUG -0.47%) is a smart choice. It tracks the CRSP US Large Cap Growth index, which includes companies that are expanding sales and earnings at a faster pace. That tilts its portfolio toward tech-driven names.
This tilt has paid off for investors. Over the past decade, the ETF has averaged annualized returns of nearly 16.3% through the end of July, outpacing the broader market. For investors who believe that technology and growth stocks will continue to lead the way, the Vanguard Growth ETF should be a top option.
The fund is also inexpensive. With an expense ratio of just 0.04%, it's one of the cheapest ways to get broad exposure to growth stocks. While you sacrifice some diversification compared to the Vanguard S&P 500 ETF, the payoff is more upside potential. Pairing this growth ETF with a core holding like the Vanguard S&P 500 ETF can give your portfolio an extra boost.
3. Vanguard Information Technology ETF
The Vanguard Information Technology ETF (VGT -0.27%) is great for investors who want even more focused exposure to the tech sector. It tracks the MSCI US Investable Market Information Technology 25/50 index, which gives concentrated exposure to leading companies in the semiconductor, software, and artificial intelligence (AI) spaces.
The fund is top-heavy. Nvidia, Microsoft, and Apple alone made up close to 45% of the portfolio as of the end of July, while its top 10 positions accounted for nearly 60%. That concentration has fueled extraordinary returns, though: The fund averaged a 21.6% gain annually over the past decade.
The expense ratio is 0.09%, which is low for a sector-focused fund. While it doesn't hold some popular names you might expect, such as Alphabet or Amazon (which, despite their tech bona fides, are not classified as information technology companies), it does include other important players such as Broadcom, AMD, and Palantir. You wouldn't want to make this ETF your entire portfolio, but if you want targeted exposure to the tech trends shaping the future, the Vanguard Information Technology ETF is an excellent way to get it.
4. Vanguard Mega Cap Value ETF
Growth stocks may get more attention, but value stocks have their place, too. The Vanguard Mega Cap Value ETF (MGV -0.37%) gives investors exposure to the largest value-oriented companies. It tracks the CRSP US Mega Cap Value index, which leans heavily into financials, healthcare, and consumer staples.
Top holdings include Berkshire Hathaway, JPMorgan Chase, Bank of America, Walmart, and ExxonMobil. Healthcare leaders like UnitedHealth, Johnson & Johnson, and AbbVie also play big roles in its portfolio. Together, they can provide balance and a measure of downside protection to your holdings if growth stocks cool off.
Its performance has been steady, if not spectacular. The ETF has delivered a 14.3% annualized return over the past five years and 10.8% annually over the past decade. Its cost is low, with an expense ratio of 0.07%. For investors looking to balance out growth-heavy funds, the Vanguard Mega Cap Value ETF is a simple, straightforward option.
5. Vanguard International High Dividend Yield ETF
Most U.S. investors' holdings are concentrated in domestic equities, but adding international exposure can be a smart move. Picking up some shares of the Vanguard International High Dividend Yield ETF (VYMI -0.20%) is one way to do this. It tracks the FTSE All-World ex U.S. High Dividend Yield index, which includes non-U.S. companies paying dividends with above-average yields.
The portfolio is diverse, with more than 40% invested in Europe, over 25% in Asia-Pacific, and just above 20% in emerging markets. Top names include Nestlé, Roche, Toyota, and Shell. That mix adds geographic diversification to a portfolio while also providing income.
The results speak for themselves. The ETF has gained nearly 26.8% year to date as of Aug. 15 and has delivered annualized returns of 13.8% over the past five years as of the end of July. Its expense ratio is a modest 0.17%. While most U.S. investors' portfolios should still be anchored in U.S. markets, this ETF adds an important layer of global diversification and dividend yield.
