3 Vanguard ETFs to Buy with $2,000 and Hold Forever

If you’re looking for a more passive approach to investing, but don’t want to sacrifice your potential earnings, there’s an obvious solution: exchange-traded funds, or ETFs. Of course, these are pre-selected baskets of stocks bought and sold as a group. With them, you don’t have to figure out which individual companies to own or avoid. Your strategy is simply to choose the right baskets.

The irony: Simpler strategies often bear more fruit than complex ones created by choosing individual actions.

With that as a backdrop, here’s a look at three very different, but very complementary, Vanguard exchange-traded funds that may have a place in your portfolio.

If you’ve been an investor for a while, you’ve almost certainly been advised to start with an index fund that tracks the performance of S&P 500 (SNPINDEX: ^GSPC). The thing is, this is actually (still) good advice.

It’s all too easy to underperform the broad market by trying to beat it. Even most professionals can’t do it consistently, in fact. Figures analyzed by Standard & Poor’s indicate that over the past five years just over 77% of actively managed mutual funds available to US investors lagged the performance of the S&P 500, while over the past ten years, almost 85% of them. the funds underperformed the benchmark.

Connect the dots. Simply holding a stake in the world’s best-known market barometer is now only guaranteed to match its usually bullish long-term performance: an average annual gain of just under 10% per year But you’re also more likely to outperform most other investors, including professionals.

Vanguard’s answer to the problem is the Vanguard S&P 500 ETF (NYSEMKT: VOL)which, as its name suggests, aims to reflect the performance of the family index. And your returns should be very, very close to the S&P 500. After all, this fund’s annual expense ratio is just 0.03% of the value of your position. Brokerage firm Charles Schwab reports that the typical ETF expense ratio is around 0.25%, and in some cases much higher.

Oh!it’s not a sexy or exciting background. But that’s the point. It’s the kind of fund that makes sense as a buy-and-hold investment that you don’t plan to sell (or even bother to look at) in the short term.

If you’re looking for long-term growth, you’ve probably dismissed the idea of a dividend-focused ETF. And it’s understandable. But a closer look at this part of the market might change your mind.

As you can imagine, the Vanguard Dividend Appreciation ETF‘s (NYSEMKT: VIG) The main feature is dividend growth. Created to mimic the S&P US Dividend Growers Index, it holds only US stocks (of all market capitalizations) with a track record of at least 10 consecutive years of annual dividend increases. However, it also excludes the top 25% of returns from eligible tickers, as such high returns often indicate an inability to continue to increase those underlying payouts.

But its current dividend yield of 1.7% is simply too low to offset the benefit of dividend growth as well as the lack of price appreciation potential that these stocks likely have. This, surprisingly, is not the case on either front.

As for the presumptive, modest dividend growththis ETF’s quarterly dividend payments have roughly doubled over the past decade. As data from mutual fund firm Hartford points out, stocks of companies that are willing and able to consistently increase their dividends tend to outperform other stocks (on a net return basis) by a factor of about two to one

A comparison of the Vanguard Dividend Appreciation ETF’s performance with and without dividend reinvestment also underscores the point. From a capital appreciation perspective alone, VIG’s value has nearly tripled since 2006. However, buying more shares with dividends spread along the way increases its overall net return for that time period by a 44%

However, perhaps the most compelling aspect of a position in this particular Vanguard ETF is that you can turn your dividend reinvestment option on and off at will without selling the fund and potentially incurring a tax bill as a result. Just contact your brokerage firm to make the change.

Last but not least, add the Vanguard Information Technology ETF (NYSEMKT:VGT) on your list of exchange traded funds to buy and hold forever if you have a couple of thousand dollars that you are ready to put to work.

Sector-specific funds obviously bring an above-average element of risk: the risk that a particular sector will encounter cyclical or even secular headwinds. The technology sector is no exception to this reality. In fact, at the very least, stocks in the tech sector consistently exhibit above-average volatility.

Let’s be realistic, though. As much as most of the world’s great socio-cultural changes of the last 30 years have ultimately been driven by technology companies, this is likely to be no different over the next 30. Technology itself is powerful enough to improve and even while creating new technologies! That’s why these stocks are likely to continue to outperform for the foreseeable future.

But what actions? That’s all. you don’t know The top holdings in this ETF right now are Apple, Nvidia, Microsofti Broadcombut that wouldn’t necessarily have been the case 30 years ago. These companies grew in these spaces, displacing other tech names in the process. These now bigger stocks may also be pushed aside over the next 30 years by unknown upstarts with new and better ideas.

With this ETF that aims to reflect the cap-weighted collective performance of US-listed technology stocks, you won’t need to keep your finger on the pulse of these changes within the technology sector. Vanguard will automatically take care of this work with its regular rebalancing of all fund positions.

Just understand that with market leading stocks you usually tend to have significant volatility. It’s still worth it in the long run.

Ever feel like you’ve missed the boat on buying the hottest stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock. recommendation for companies that believe they are about to exit. If you’re worried that you’ve already missed your investment opportunity, now is the best time to buy before it’s too late. And the numbers speak for themselves:

Nvidia: if you invested $1,000 when we doubled in 2009, you would have $357,084!*
Apple: if you invested $1,000 when we doubled in 2008, you would have $43,554!*
Netflix: if you invested $1,000 when we doubled in 2004, you would have $462,766!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another opportunity like this anytime soon.

See 3 “Double Down” actions »

* Stock Advisor returns from January 13, 2025

Charles Schwab is an advertising partner of Motley Fool Money. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, the Vanguard Dividend Appreciation ETF and the Vanguard S&P 500 ETF. The Motley Fool recommends Broadcom and Charles Schwab and recommends the following: long January 2026 $395 calls on Microsoft, short $405 January 2026 calls on Microsoft, and short $80 March 2025 calls on Charles Schwab . The Motley Fool has one disclosure policy.

3 Vanguard ETFs to Buy with $2,000 and Hold Forever was originally published by The Motley Fool

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