Despite its volatility and occasional bear markets, the U.S. stock market remains one of the best long-term wealth-creation tools for everyday investors. It represents the potential, growth, and possibilities of the global economy in a way that nothing else really does.
What’s interesting is that it often rewards those who do the least with it. By investing regularly and letting long-term compounding do its thing without trying to time the market, people turn modest monthly contributions into millions of dollars down the road.
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One of the best ways to accomplish this is by using the Vanguard S&P 500 ETF (NYSEMKT: VOO). By investing in hundreds of U.S. economic leaders, investors participate in the growth of the world’s most successful businesses.
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Investing in the S&P 500 means investing in the largest and most successful U.S. companies.
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Instead of trying to pick individual winners, investing in the S&P 500 is essentially buying the entire U.S. economy.
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With an expense ratio of just 0.03%, the Vanguard S&P 500 ETF is among the cheapest ways to invest in the index.
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Bear-market pullbacks can result in drawdowns of 30% or more, but a long-term buy-and-hold approach has still rewarded investors.
If your investing time horizon is several years, if not decades, investing in healthy, durable, and successful companies is never a bad strategy. That’s what makes investing in the Vanguard S&P 500 ETF such a smart choice.
It targets 500 of the largest companies across the entire economic landscape, including tech, healthcare, energy, and consumer goods. That gives investors a great cross-section of sectors, themes, economic cycles, and volatility profiles. This diversification helps mitigate risks from any individual company or group and supports the pursuit of broad, long-term capital growth.
The S&P 500 has roughly one-third of its index in tech stocks right now, which creates a short-term imbalance. But this allocation also emphasizes what the U.S. economy currently is and where it’s heading.
A lot of investors would choose the Vanguard Growth ETF (NYSEMKT: VUG) for this purpose instead of the Vanguard S&P 500 ETF. Let’s put the two side by side to see how they compare.
