The money you put into your retirement savings can't just sit in cash. It's important to invest that money so it grows over time.
The problem is that investing doesn't come naturally to everyone. You may not have the time or patience to learn how to analyze a stock. And you may also not want to put that pressure on yourself. If you buy shares of a specific stock and it does poorly, that could have a huge impact on your portfolio -- and mental health.
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Thankfully, there's an easy way to grow wealth for retirement without having to be an active investor who tracks stock movement daily and rebalances constantly. If you choose a diversified, low-maintenance exchange-traded fund (ETF), you can set up your portfolio up to grow over time without having to do a thing.
Why the Vanguard S&P 500 ETF works well for so many investors
The Vanguard S&P 500 ETF (VOO +1.60%) tracks the S&P 500 index, which consists of the 500 largest publicly traded companies by market cap. When you invest in this fund, you get access to tech giants, producers of consumer goods, financial companies, healthcare leaders, and more.
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Key Data Points
That's important for a few reasons. First, the Vanguard S&P 500 ETF offers built-in diversification, so you don't have to worry about having all of your money in a single market sector.
Second, because the S&P 500 consists of large-cap companies, you're not putting your money into speculative businesses whose future is iffy. Rather, you're investing in established companies.
Historically, the S&P 500 index has managed to deliver strong returns for investors. This doesn't mean the index gains value every year. Like the market as a whole, it's subject to volatility. But over extended periods of time, investing in the S&P 500 is likely to grow your portfolio.
Buy, hold, and relax
If you're going to invest in the Vanguard S&P 500 ETF, the key is to do so over a longer horizon. On a five-year basis, you could end up losing money if you invest in the S&P 500 and there's a bear market followed by a period of sluggish returns. But over 20 or 30 years, you could come out a real winner.
Plus, like many Vanguard funds, the firm's S&P 500 ETF has a low expense ratio of just 0.03%. That means you shouldn't have to worry about high fund fees eating into your returns.
Remember, no investment is risk-free, and the Vanguard S&P 500 ETF certainly carries its share of risk. But if you have a long investment window ahead of you, it could pay to go all-in on this ETF if you value simplicity and the potential for strong returns.
