Many people would rather not spend hours researching and monitoring stocks to invest in, and that's totally fine. That's why exchange-traded funds (ETFs) have become so popular. These funds typically represent hundreds, sometimes thousands, of stocks so that investors can build a diversified portfolio with the ease of a single ticker symbol.
Vanguard has long been a trusted name in the ETF space, building its sterling reputation over decades. The company offers several low-cost funds, ideal for someone who wants to set and forget their way to long-term wealth.
Both of these Vanguard funds require just $1 to invest, so consider them as cornerstones for your long-term portfolio.
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1. VYM: Turn up your dividend income with this ETF
Dividends are fantastic because they represent investment returns you can realize without selling your shares. You can pay your bills with dividends or reinvest them to compound your income over time with additional shares. If that interests you, then consider the Vanguard High Dividend Yield ETF (VYM 0.60%). The ETF's expense ratio is negligible at just 0.06%.
Sometimes, high dividend yields can be a red flag if the underlying company is facing problems. Using an ETF to achieve higher dividend yields effectively mitigates that risk through diversification. The Vanguard High Dividend Yield ETF holds 566 stocks, so even if one of those companies falls on its face, it won't sink the broader ETF.
NYSEMKT: VYM
Key Data Points
The Vanguard High Dividend Yield ETF tracks the FTSE® High Dividend Yield Index and currently yields 2.45%. Again, you may find higher yields elsewhere, but those often come with increased risk. This ETF offers investors exposure to various market sectors while dialing back tech exposure to just 13% of the fund. That makes it a great complement to many ETFs, since technology has become a significant weight in most market indexes and funds.
The ETF's top holdings include prominent blue-chip dividend stocks such as Broadcom, JPMorgan Chase, ExxonMobil, Johnson & Johnson, AbbVie, and Home Depot. These companies are the bedrock of the U.S. economy, often with years, if not decades, of uninterrupted dividend increases. Don't hesitate to lean on the Vanguard High Dividend Yield ETF for that passive income and peace of mind.
2. VOO: This ETF is the ideal investment to set and forget
You won't find a more proven wealth machine than the S&P 500 index. The famous stock market index represents 500 of America's largest and most important companies. It's the benchmark almost every investor uses to evaluate their portfolio's performance. However, you can't actually invest in the S&P 500, at least not directly. Instead, you would look at an ETF, such as Vanguard's S&P 500 ETF (VOO +0.20%).
Just how good has the S&P 500 been? It has generated annualized returns of approximately 8% from 1928 through 2024. That doesn't sound impressive at first glance, but it's the consistency that stands out, especially as money compounds over time. These historical returns would double your investment every nine years on average, which adds up over a lifetime of steady saving!
NYSEMKT: VOO
Key Data Points
The S&P 500 can be pretty volatile, even crashing at times. That said, the S&P 500 has overcome recessions, wars, pandemics, and countless political cycles to continue setting new highs. Currently, the Vanguard S&P 500 ETF charges an expense ratio of just 0.03%, so you keep almost your entire investment.
The ETF gives you broad exposure to the U.S. economy. Still, the tech sector has become crucial to economic growth. The Vanguard S&P 500 ETF is weighted nearly 45% toward technology and communications services, with the "Magnificent Seven" stocks making up its top holdings. That makes this ETF a sneaky way to invest in artificial intelligence, while keeping it simple and diverse enough to set it and forget it.
