2 Vanguard ETFs to Buy With $100 and Hold Forever

In the ever-evolving world of investing, finding the right exchange-traded funds (ETFs) to hold for the long term can be a game-changer. With just $100, you can start building a diversified portfolio that can grow with you over the years. Vanguard, known for its low-cost and reliable ETFs, offers two standout options that are perfect for long-term investors: the Vanguard S&P 500 ETF (VOO) and the Vanguard Total Stock Market ETF (VTI). Let's dive into why these two ETFs are worth considering and how they can fit into your investment strategy.

Vanguard S&P 500 ETF (VOO)

The Vanguard S&P 500 ETF (VOO) is a classic choice for investors looking to bet on the future of the American economy. This ETF tracks the S&P 500 index, which includes 500 of the largest and most established companies in the United States. Together, its holdings represent around 80% of the entire U.S. stock market's value. This means that by investing in VOO, you're essentially investing in the backbone of the American economy.

One of the key advantages of VOO is its low expense ratio of 0.03%, which is significantly lower than the industry average. This cost efficiency allows more of your investment to grow over time, making it an attractive option for long-term investors. Over the past 10 years, VOO has delivered an average annual return of 13.10%, showcasing its ability to provide competitive returns while minimizing costs.

Vanguard Total Stock Market ETF (VTI)

For investors looking to diversify their portfolio even further, the Vanguard Total Stock Market ETF (VTI) is an excellent choice. This ETF aims to deliver the performance of the CRSP US Total Market Index, which includes more than 3,500 stocks. Unlike VOO, which focuses on large-cap stocks, VTI covers a wider range of companies, including small and mid-cap stocks. This broader scope means VTI offers more extensive diversification across the entire U.S. stock market.

VTI's low expense ratio of 0.03% makes it another cost-effective option for long-term investors. Over the past 10 years, VTI has delivered an average annual return of 12.56%, slightly lower than VOO but still robust. This consistency can be beneficial for investors seeking steady growth over extended periods.

Key Differences and Considerations

While both VOO and VTI offer low-cost and diversified exposure to the U.S. stock market, there are key differences in their diversification strategies that impact their risk and return profiles.

1. Diversification Strategy:
- VOO: Focuses on the 500 largest companies, providing broad exposure to the largest and most established companies in the U.S. market.
- VTI: Covers a wider range of companies, including small and mid-cap stocks, offering more extensive diversification across the entire U.S. stock market.

2. Risk Profile:
- VOO: Less diversified compared to VTI, making it more susceptible to market movements and sector-specific risks.
- VTI: Broader diversification can help mitigate the impact of poor performance in any one sector or company, potentially reducing overall risk.

3. Return Profile:
- VOO: Focus on large-cap stocks can lead to higher returns during bull markets.
- VTI: Broader diversification can provide more consistent returns over the long term.

Conclusion

In conclusion, both the Vanguard S&P 500 ETF (VOO) and the Vanguard Total Stock Market ETF (VTI) are excellent choices for long-term investors looking to build a diversified portfolio with just $100. VOO offers a more concentrated exposure to large-cap stocks, which can lead to higher returns but also higher risk. In contrast, VTI provides broader diversification across the entire U.S. stock market, potentially reducing risk and offering more consistent returns. By investing in either of these ETFs, you can take advantage of Vanguard's low-cost and reliable investment strategies, setting yourself up for long-term success.