For more than a century, stocks have stood atop the pedestal as the premier wealth creator. While commodities, real estate, and bonds have done their part to increase the nominal wealth of investors, stocks have maintained the highest average annual return of the bunch.
But just because stocks have outperformed, it doesn't mean equities move higher in a straight line. In fact, things can get downright dicey on Wall Street from time to time.
Earlier this year, the benchmark S&P 500 (^GSPC -0.22%), iconic Dow Jones Industrial Average (^DJI -0.35%), and growth stock-dominated Nasdaq Composite (^IXIC -0.24%) were pummeled. Shortly after President Donald Trump introduced his tariff and trade policy, the Dow Jones and S&P 500 fell firmly into correction territory, with the Nasdaq dipping into what turned out to be a short-lived bear market.
Image source: Getty Images.
When volatility picks up on Wall Street, it's not uncommon for investors to seek out perceived-to-be safer investments. That's where exchange-traded funds (ETFs) can be of assistance.
ETFs are growing in popularity with retail investors
An ETF contains a basket of securities that can allow investors to diversify or concentrate their portfolio at the click of a button. If you want to invest in large-, mid-, or small-cap stocks, a specific sector or innovation trend, or buy into growth, value, or dividend stocks, there's assuredly an ETF that can help you do that.
ETFs can be especially handy for retail investors who want exposure to stocks without the potential hassle or risk of buying stakes in individual companies.
We know that everyday investors have welcomed ETFs with open arms thanks to the transparency of Robinhood Markets' "100 Most Popular" leaderboard. This top-100 list features the 100 securities (stocks and ETFs) most commonly held by Robinhood's customers.
While it's no surprise to find all members of the "Magnificent Seven" near the top of Robinhood's leaderboard, what really stands out is that nine of the 22 most held securities on the platform are ETFs. This includes the Vanguard S&P 500 ETF (VOO -0.27%), which is the sixth most-held security on the platform, and the No. 1 ETF on Robinhood.
As its name implies, the Vanguard S&P 500 ETF aims to mirror the return of the benchmark S&P 500 as closely as possible.
If you're wondering why someone might want to pace the performance of the S&P 500, take a gander at its trailing 20-year return, not including dividends. Between Oct. 4, 2005, and Oct. 3, 2025, the broad-based index advanced from 1,214.47 to 6,715.79, which works out to an average annual return of 8.93%.
If this historical annualized return of 8.93% were to persist for another 20 years, and retail investors were to invest $100,000 initially into the Vanguard S&P 500, as well as add $625 at the end of each month over this two-decade period ($7,500 annually), they would become a millionaire, as the return table below shows:
| Year | Ending Balance | Year | Ending Balance |
|---|---|---|---|
| Year 1 | $117,119.43 | Year 11 | $405,582.62 |
| Year 2 | $135,831.77 | Year 12 | $451,135.65 |
| Year 3 | $156,285.25 | Year 13 | $500,927.26 |
| Year 4 | $178,641.86 | Year 14 | $555,351.84 |
| Year 5 | $203,078.70 | Year 15 | $614,840.47 |
| Year 6 | $229,789.31 | Year 16 | $679,864.35 |
| Year 7 | $258,985.26 | Year 17 | $750,938.52 |
| Year 8 | $290,897.82 | Year 18 | $828,625.94 |
| Year 9 | $325,779.76 | Year 19 | $913,541.95 |
| Year 10 | $363,907.35 | Year 20 | $1,006,359.16 |
Returns compounded annually, not including dividends or net expense ratio.
The Vanguard S&P 500 ETF is the superior S&P 500 tracking index
Interestingly enough, if you were to pull up Robinhood's 100 Most Popular list, you'd discover that the Vanguard S&P 500 ETF isn't the only S&P 500 tracking index among the top-10 holdings. The SPDR S&P 500 ETF Trust (SPY -0.25%) is the second most held ETF and No. 9 overall holding by retail investors.
The SPDR S&P 500 ETF Trust was the very first U.S.-listed ETF (in 1993), and it's paved the way for about two dozen other index funds to come along and attempt to mirror the performance of the benchmark S&P 500. While there's almost no variance between the returns of the Vanguard S&P 500 ETF, SPDR S&P 500 ETF Trust, and the other S&P 500 index funds, as we'd expect, there is one notable differentiating factor that makes Robinhood's No. 1 ETF superior to its peers: the net expense ratio.
A fund's net expense ratio is the fee investors pay that covers management fees and marketing expenses. Ideally, investors want the lowest net expense ratio possible, which would allow them to hang onto more of their capital.
Image source: Getty Images.
The SPDR S&P 500 ETF Trust has a net expense ratio of roughly 0.09%, which is below the average net expense ratio of 0.15% for index funds. This means $0.90 will be kept as a fee for every $1,000 invested.
Meanwhile, the Vanguard S&P 500 ETF has a truly microscopic net expense ratio of 0.03% ($0.30 going to fees for every $1,000 invested). Though a difference of six-hundredths might not sound like much, it can add up over multiple decades, or if you're dealing with a sizable initial/ongoing investment.
Based on data from the analysts at Crestmont Research, there hasn't been a rolling 20-year period since the start of the 20th century where the S&P 500 hasn't delivered a positive annualized total return, including dividends. If this more than century-long pattern continues to hold true, the Vanguard S&P 500 ETF would represent the closest thing to a guaranteed moneymaker on Wall Street for retail investors.
