Stock picking is a fantastic way to build wealth as it offers you the opportunity to construct a portfolio that perfectly suits your investment style: If your priority is passive income, for example, you can favor dividend stocks, or if you're an aggressive investor, you can weight cutting-edge technology companies more heavily. Ideally, you should work toward owning 25 stocks or more and holding onto them for the long term.
Meanwhile, as you construct this portfolio or add to it, you might take an additional step to automatically add diversification and safety to your investment. And that's by investing in one particular exchange-traded fund (ETF). This fund, managed by Vanguard, has proven itself over time, so if you buy and hold on for a number of years, you're very likely to score a win. Let's check out the best Vanguard ETF to invest $1,000 in right now.
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Instant diversification
First, though, let's take a quick look at how ETFs operate. These funds offer you a way to invest in a particular theme, from financial stocks to biotech, or an entire index such as the S&P 500. So, after you hit the "buy" button and once your transaction is complete, you've instantly expanded the diversification of your portfolio. This is positive because if one stock or sector suffers, others may not -- and this could limit any potential declines.
Of course, ETFs don't explode higher in a single day or two like certain high-growth tech stocks have been known to do, but they aren't designed for that purpose. Instead, they're meant to offer you steady growth over the long run. And regular investing in them, thanks to compounding, could significantly speed up your pace along the path to wealth.
ETFs trade on the market every day like a stock, so if you're used to buying stocks, you will follow the same procedure. Meanwhile, it's important to keep in mind that ETFs come with fees, and you'll see these through the expense ratio. Be sure to buy ETFs with an expense ratio of less than 1% to maximize your gains over time.
Now, let's consider this ETF to buy with $1,000 right now. I'm talking about the Vanguard S&P 500 ETF (VOO +0.04%), a fund that tracks the composition and performance of the famous benchmark. This investment offers you exposure to the 500 companies leading the economy of the day -- and this will always be the case as the index rebalances quarterly to admit and remove certain members. As the ETF mimics these moves, this ensures that you'll always be invested in the most compelling companies of the times, offering you solid growth potential.
NYSEMKT: VOO
Key Data Points
Exposure to Nvidia, Apple, and Microsoft
Today, for example, technology stocks are the most heavily weighted in the index and ETF, led by Nvidia, Apple, and Microsoft, but this could change at any point in the future. And the investment offers you broad diversification since the index and ETF include 11 industries, from financials to healthcare. And with an expense ratio of only 0.03%, this fund clearly fits our investing criteria.
All of this is fantastic, and what's even better is that this formula has resulted in proven success over the long haul. The S&P 500, since its creation as a 500-company index in the late 1950s, has delivered an average annual return of 10%. So, history shows us that if you invest in the index through an ETF and hold on for a number of years, you're very likely to score a win.
I say that "now" is a great moment to invest $1,000 in this fund for one good reason: It's best to get in on this investing opportunity as early as possible so that you can remain invested for many years, maximizing your potential for gains. So, whether the S&P 500 rises, falters, or falls this year, there's no need to worry -- this investment has a fantastic track record of delivering long-term growth to investors.
