Among exchange-traded fund (ETF) issuers, Vanguard stands above the rest in my view. The firm had the second-highest assets under management (AUM) at the end of 2025, sitting at $2.64 trillion, trailing only BlackRock. Meanwhile, Vanguard has always been the low-cost leader, focusing on index-based funds.
While I'm a stock picker at heart, I think one of the best investments that most people can make is in an index-based ETF. And with their low expenses and strong liquidity, Vanguard index ETFs are some of the best around.
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How a Vanguard index ETF helps build long-term wealth
The fact of the matter is that the S&P 500 has outperformed more than 85% of actively managed large-cap funds over the past decade. One reason for this is costs, and the expenses of actively managed funds can greatly eat into investors' returns over time.
The Vanguard S&P 500 ETF (VOO -1.21%), which tracks the index, has an expense ratio of only 0.03%. That means you're paying only $0.30 for every $1,000 invested. That essentially lets you keep nearly all your gains, which becomes increasingly important as your portfolio balance grows over time.
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The other big reason market-cap-weighted index funds like the Vanguard S&P 500 ETF tend to outperform actively managed funds is that they operate in the exact opposite way most fund managers invest. Fund managers typically will pare top-performing positions in the name of risk management, while they will also double down on their "best ideas" after they have pulled back.
Market-cap-weighted indexes like the S&P 500 do the opposite. They let their winners continue to run and become bigger percentages of their holdings, while they let losers naturally fade.
This Darwinian survival-of-the-fittest approach works because the market actually isn't driven by a large group of stocks going up, but instead by a handful of megawinners. A JPMorgan Chase study found that between 1980 and 2020, over 40% of stocks in the Russell 3000 had negative absolute returns, while about 10% drove the market's overall performance.
That's why using the Vanguard S&P 500 ETF as a core holding that you consistently dollar-cost average into over a long period of time is one of the best ways to create long-term wealth. The ETF is a proven winner, with an average annual return of 15.5% over the past decade. If you had invested $1,000 a month over that period, you would have had over $270,000 at the end of it, but at a similar return over 30 years, that would jump to over $6 million, with 94% of it coming from gains.
