What are the three most important ingredients to invest successfully? Having some upfront money to invest is near the top of the list. A good alternative to invest in is critical, too. I'd say the third ingredient is time. The more time you have, the more money you can make.
If you're looking to put all those ingredients together, I have some ideas for you. Here are three Vanguard exchange-traded funds (ETFs) to buy with $2,000 and hold forever.
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1. Vanguard S&P 500 ETF
The easiest pick of all, in my view, is the Vanguard S&P 500 ETF (VOO 0.55%). As its name indicates, this Vanguard ETF attempts to track the performance of the S&P 500 (^GSPC 0.49%).
That performance has been quite good over the long run. Since its inception in September 2010, the Vanguard S&P 500 ETF has delivered an average annual return of 14.7%. Over the last year, the fund has jumped nearly 16%. VOO-Vanguard S&P 500 ETF | Vanguard
Buying this Vanguard ETF gives you partial ownership in 500 of the largest public companies in the U.S. Its top holdings currently include Nvidia (NVDA 0.34%), Microsoft (MSFT 1.83%), Apple (AAPL 3.25%), Amazon (AMZN 0.23%), and Meta Platforms (META -0.26%). However, the makeup of the ETF's holdings changes over time.
There are several other S&P 500 index ETFs you could buy. However, I like Vanguard's because of its low annual expense ratio of only 0.03%.
2. Vanguard Russell 1000 Growth ETF
What's the best-performing ETF since inception in Vanguard's family of funds? The Vanguard Russell 1000 Growth ETF (VONG 0.98%). This ETF has generated an average annual return of 16.96%. Over the last 12 months, it's up roughly 22.5%.
The Vanguard Russell 1000 Growth ETF invests in stocks in the Russell 1000 Growth Index. It owns 390 growth stocks, with top holdings including Nvidia, Microsoft, Apple, Amazon, and Broadcom (AVGO -0.05%).
Most of those names should be familiar, since they're also in the top holdings of the Vanguard S&P 500 ETF. That shouldn't be surprising. As the market caps of the best growth stocks increase, they float to the top of the S&P 500.
You will have to pay a little more to own the Vanguard Russell 1000 Growth ETF. Its annual expense ratio is 0.07%. However, that's still cheap compared to the 0.93% average expense ratio for similar funds.
3. Vanguard Small-Cap Value ETF
My third pick takes a different approach. The Vanguard Small-Cap Value ETF (VBR -0.73%) seeks to track the performance of the CRSP U.S. Small Cap Value Index. You probably won't be surprised that this index focuses on value stocks with relatively small market caps.
The Vanguard Small-Cap Value ETF has delivered an average annual return of 9.03% since its inception in January 2004. It has risen by only 7.5% over the last 12 months. That's well below the gains the other two Vanguard ETFs on the list have generated. However, I think over the next several decades, the Vanguard Small-Cap Value ETF could be a much bigger winner.
Studies have found that small-cap stocks outperform large-cap stocks over the long term. Value stocks also outperform growth stocks. This Vanguard ETF combines both. It owns 835 stocks, none of which make up more than 0.75% of the fund's total portfolio. Over 58% of the Vanguard Small-Cap Value ETF's holdings are in the industrial, financial, and consumer discretionary sectors, which don't command the premium valuations that the technology sector does.
The annual expense ratio for this Vanguard ETF is 0.07%. That's only a fraction of the 1.1% annual expense ratio of similar funds.
