Are you worrying about where the stock market may be going this year, whether the Fed will cut rates, or whether the economy will be in good shape?
These issues can have significant effects on stocks, but only in the short term. If you're investing for the long haul and planning on holding on to your investments for years, you don't have to worry about these kinds of things. Warren Buffett has remained invested in the market for decades, even amid wars and all sorts of economic turbulence.
The big advantage long-term investors have is that they don't have to care about what's going on in the market every day. Over a period of 20 or 30 years, the types of short-term developments impacting the market each day will look insignificant compared to much broader and longer-term trends. And over the long term, the U.S. economy has done just fine and is likely to continue doing so.
If you want to simplify your investing strategy, there are a couple of excellent Vanguard funds you can load up on today, which are excellent options to hang on to for the long term: the Vanguard S&P 500 ETF (VOO 0.02%) and the Vanguard Utilities Index Fund ETF (VPU +0.27%).
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Vanguard S&P 500 ETF
The Vanguard S&P 500 ETF tracks the S&P 500, which is a collection of the leading stocks on U.S. markets, and which is effectively a gauge of how the overall market is doing. Investors use ETFs to track the index, and the Vanguard fund is particularly attractive because of its low fees. Its expense ratio is just 0.03%. That means on a $10,000 investment, you're only paying $3 in fees per year.
Historically, the S&P 500 has been a solid index to track due to its long-term stability and continued growth. It has averaged an annual return of around 10%. However, in each of the past three years, it has outperformed that. But even if you're worried about the index being due for a possible slowdown in the near future, it can be a great way to invest in the stock market for the long haul.
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There will inevitably be bad years, but there will also be some really good ones along the way. The ETF will also provide you with a dividend, which today yields around 1.1%. It's a modest amount, but it can help pad your overall returns from this investment.
Vanguard Utilities Index Fund ETF
An even safer, lower-risk option is the Vanguard Utilities Index Fund ETF. Since it focuses on utility stocks, there isn't going to be much volatility with this investment. Its beta value of 0.64 indicates that it generally doesn't move closely with the overall market.
That lack of volatility can be crucial if your priority is to collect dividend income. At 2.5%, the ETF's yield is more than double what you'd get with the Vanguard S&P 500 ETF. The fund's focus on top utility stocks such as NextEra Energy, Constellation Energy, and Duke Energy make it a suitable option for risk-averse investors. Utility stocks generate a lot of recurring income that can provide investors with long-term consistency and stability. People need to heat their homes in the winter, regardless of economic conditions.
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The fund can make for a boring investment, and its returns may be underwhelming, but that's the trade-off that often comes with focusing on safety. Moreover, the stable dividend income the ETF can generate for your portfolio can make it a vital asset to hang on to, because over time it can add up significantly and help put you in a much stronger financial position. And with a fairly low expense ratio of 0.09%, your fees will be minimal from this investment.
