The stock market continues to surge, with the S&P 500 (^GSPC +0.89%) up by just over 30% since its low point in April, as of this writing, and the Nasdaq Composite (^IXIC +1.36%) soaring by more than 42% in that time.
While it's unclear how long stock prices will continue to climb, if you're investing in the right places and maintaining a long-term outlook, when you buy doesn't necessarily matter. Strong stocks and funds are likely to survive volatility and experience long-term growth, even if the near term gets rocky.
Regardless of what the future holds for the market, these three Vanguard ETFs can be fantastic buys right now.
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1. Vanguard Total Stock Market ETF
If you're looking to own a slice of the entire market, the Vanguard Total Stock Market ETF (VTI +0.88%) can be a fantastic choice. This ETF contains 3,526 stocks, and it aims to replicate the performance of the stock market as a whole.
By owning just one share of this fund, you'll gain exposure to stocks across all industries -- ranging from tech behemoths like Nvidia and Apple to smaller stocks from more niche sectors of the market. Greater diversification can help limit your risk, and because this fund tracks the entire market, it's incredibly likely to recover from slumps.
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The downside, though, is that because it follows the performance of the market, it can't beat the market. If average returns are a worthwhile trade-off for a relatively safe ETF, that may not be a negative for you. But if you're aiming to earn above-average returns, this ETF may not be the best fit.
2. Vanguard High Dividend Yield ETF
Investing in dividend stocks is one of the most effective ways to generate long-term passive income. The Vanguard High Dividend Yield ETF (VYM +0.67%) includes 580 dividend stocks across all sectors of the market.
When you invest in a dividend ETF, you'll get a small dividend payment on a set schedule -- generally each quarter. This fund paid out its most recent dividend in June, and it was around $0.86 per share. While that may not sound like much, the more shares you have, the more you'll earn.
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You can also reinvest those dividends to buy more shares. Over time, this can have a snowball effect. The more shares you own, the more you'll receive in dividends, and the more shares you can buy with those dividends. After decades of investing, it's possible to rack up thousands of dollars per year in passive dividend income.
3. Vanguard Information Technology ETF
Industry-specific ETFs can be a smart way to invest in particular industries without having to research and buy individual stocks. A tech-focused ETF, like the Vanguard Information Technology ETF (VGT +2.34%), can help supercharge your savings, as this industry is chock-full of powerhouse stocks.
This ETF contains 317 stocks from all corners of the tech sector, but its three largest holdings include Nvidia, Microsoft, and Apple. Because tech stocks have been thriving in recent years, this ETF has experienced staggering growth.
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Over the past 10 years, this fund has earned an average rate of return of over 22% per year. For comparison, the Total Stock Market ETF has earned an average return of close to 14% per year in that time, while the High Dividend Yield ETF has seen an average return of around 11% per year.
If you were to invest $100 per month at each of these rates, here's approximately what you could accumulate over time:
| Number of Years | Total Portfolio Value: 11% Avg. Annual Return | Total Portfolio Value: 14% Avg. Annual Return | Total Portfolio Value: 22% Avg. Annual Return |
|---|---|---|---|
| 15 | $41,000 | $53,000 | $102,000 |
| 20 | $77,000 | $109,000 | $286,000 |
| 25 | $137,000 | $218,000 | $781,000 |
| 30 | $239,000 | $428,000 | $2,120,000 |
Data source: author's calculations via investor.gov.
While these mammoth returns are hard to ignore, there is a significant downside to consider: increased volatility. The tech sector can experience nauseating ups and downs, and those waves of turbulence are often far more severe than what the market as a whole faces.
If you choose to invest in the Vanguard Information Technology ETF, be prepared to hold your investment for the long haul -- ideally, a decade or two -- despite any short-term volatility. Also, double-check that the rest of your portfolio is well-diversified, as investing in just one industry can substantially increase your risk.
The Vanguard Total Stock Market ETF, Vanguard High Dividend Yield ETF, and Vanguard Information Technology ETF all have unique strengths and weaknesses. By considering your specific investing goals and risk tolerance, you can determine which ones are the best fit for your portfolio.
