The Best Low-Cost Vanguard ETF to Invest $1,000 in Right Now

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There’s nothing wrong with the simple, low-cost Vanguard S&P 500 ETF.

“In order to have a really good investment result, all you need is patience.”

— Sir John Templeton

Everyone would love to get rich quick. After all, most of us enjoy eating the cookies far more than buying the ingredients for them at the grocery store.

Yet, as it is with cookies, it is with investing. You must put in time and effort before you can sit back and enjoy the fruits of your labor.

Still, everyone would like to find the easiest way from point A to point B. And among the simplest and cheapest tools that anyone can use to grow their wealth are excellent low-cost exchange-traded funds (ETFs).

Image source: Getty Images.

How ETFs work

An ETF is an investment security that operates much like a mutual fund, but trades like a stock. Most ETFs are pooled investment products — they hold baskets of stocks. This allows smaller retail investors to easily diversify their holdings across many stocks.

For example, if an investor wanted to buy one share of each of the 10 largest U.S. companies, that investor would need about $5,000 — and 10 transactions. One share of Eli Lilly, America’s eighth-largest company, costs $925 alone.

An ETF, on the other hand, could construct a similar portfolio of the ten largest American companies, then offer its shares for only $100 providing proportional representation to investors at a fraction of the cost. It’s similar to a potluck dinner where everyone brings a dish, and everyone gets to taste a bit of everything.

In the realm of large-cap stocks, a taste of almost everything is exactly what investors get when they buy shares of the Vanguard S&P 500 ETF (VOO 0.62%).

Why the Vanguard S&P 500 ETF is a smart choice

The Vanguard S&P 500 ETF is an index-linked ETF. That means the fund tracks a predetermined index of stocks. In this case, it’s the S&P 500 one of the most widely followed stock market indexes. And with good reason, as its components include 500 of the largest U.S.-traded companies. Among its holdings are iconic tech companies such as Microsoft, Apple, and Amazon; finance giants like JPMorgan Chase, Bank of America, and Blackrock; retailers like Costco, Walmart, and Home Depot; and industrials like Caterpillar, Honeywell International, and Parker-Hannifin.

Best of all, investors don’t have to pay much in fees to get all that broad exposure. This fund expense ratio is just 0.03% — one of the lowest ratios among all ETFs, regardless of strategy. That works out to only $3 per year for every $10,000 one has in the fund. That means investors keep more of their returns over time, allowing their positions to grow and compound faster — and taking full advantage of the power of compound growth is one of the keys to successful long-term investing.

To sum up, this ETF is a fantastic option for those investors who want to “set it and forget it.” With its simple strategy and its low fees, the Vanguard S&P 500 ETF could prove a useful tool for any investor pursuing long-term financial goals.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Jake Lerch has positions in Amazon and Caterpillar. The Motley Fool has positions in and recommends Amazon, Apple, Bank of America, Costco Wholesale, Home Depot, JPMorgan Chase, Microsoft, Vanguard S&P 500 ETF, and Walmart. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.