Vanguard has made a name for itself in the investment industry. It has a five-decade operating history, trillions of dollars in assets under management, and a long list of low-cost options that expand access to markets and asset classes for all investors. But there's one product that is a top choice right now.
Here's the best Vanguard exchange-traded fund (ETF) to invest $2,000 in this May.
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Investors can bet on the U.S. economy
The ETF to take a closer look at is the Vanguard S&P 500 ETF (VOO +1.62%). It tracks the performance of the most closely followed benchmark, the S&P 500 index, which contains the stocks of 500 or so large and profitable businesses. Investors in this ETF are basically betting on the ongoing success of the U.S. economy, which has been a smart move in the past.
While all sectors are included, it should come as no surprise that the information technology sector has the highest weighting, at 35%. And it's not even close. This sector drives the ETF's performance. Companies like Nvidia, Apple, and Microsoft are positioned at the top of the portfolio. Consequently, investors should be optimistic about these businesses and their ability to grow earnings in the long run.
Another advantage of choosing the Vanguard S&P 500 ETF is that it's a completely passive approach to gaining stock market exposure. Investors save time by avoiding listening to earnings calls, building financial models, or reading company filings. And the cheap expense ratio of 0.03% is hard to overlook.
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Putting money to work at all-time highs is still a smart move
It's impossible not to come away impressed by the Vanguard S&P 500 ETF's performance. Over the past decade, it has produced a total return of 327% (as of May 15). This would have turned a starting $2,000 investment into more than $8,500 today, translating to a notable 15.6% annualized gain that's well ahead of the S&P 500 index's yearly average historical return of 10%.
Today, the Vanguard S&P 500 ETF trades in record territory. But don't let that discourage you. May is still a great time to put money to work.
That's because patient investors are usually rewarded, especially those who can adopt a long-term mindset that spans decades into the future. The further you extend your time horizon, the less important the entry point becomes.
This isn't to say the ETF will generate a similar return to what it did in the last 10 years. No one knows for sure what will happen. However, the market has proven to be a powerful tool for building wealth. And with $2,000, the Vanguard S&P 500 ETF is a smart choice.
