In the endless quest to build fortunes that stand the test of time, certain investment vehicles have emerged as potential cornerstones for the ages. For those seeking simplicity, broad diversification, and the insulation of time’s unrelenting compounding, a handful of Vanguard’s exchange-traded funds could represent the keys to multi-generational wealth. But which specific funds might truly deserve a permanent place in your portfolio?
Prepare to be educated, as we unveil a trio of Vanguard ETFs that financial professionals near-universally tout as perpetual holdings. Strap in for an unconventional journey through the logic and data behind these unique investments – and why the path of least resistance may lead to the greatest riches.
The Vanguard S&P 500 ETF: Like Buying the Whole Dang Country
Let’s start with an elephant in the room: the Vanguard S&P 500 ETF (VOO). You’ve heard of it, your parents blindly threw money at it, and the financial media ceaselessly lauds its virtues. But what exactly are you getting with this mainstream darling?
In simple terms, the S&P 500 itself represents a Bloomberg Billionaires Index of the U.S. economy. Microsoft, Amazon, Apple, Berkshire Hathaway – all the nation’s heaviest corporate hitters dwell under this umbrella. By purchasing a single VOO share, you effectively become a part-owner of the 500 most dominant public titans across every major industry.
“The S&P 500 is about as close as you can get to just buying the whole damn country,” remarked Amiyatosh Purnanandam, a finance professor at the University of Michigan. “It’s incredibly difficult for the average person to loselonger-term money in this index, given its resilience and recovery powers.”
The stats back up the hype. Researchers at Crestmont found the S&P has generated positive total returns over literally every single 20-year period measured since its 1957 inception. Recession, booms, crashes, wars – this beast laughed them all off eventually.
In the last decade alone, VOO has produced average annual gains of 12.66% for shareholders. Perhaps its most tantalizing trait, however, is its 0.03% expense ratio. That equals just $3 per year in fees for every $10,000 invested – offering effective part-ownership of corporate America on the ultra-ultra-cheap.
“For new investors, retirees, or really anyone who doesn’t want to torture themselves with single-stock risks, VOO may be the single best buy-and-hold-indefinitely investment out there,” Purnanandam said.
The Vanguard Total Stock Market ETF: Blanketing Every U.S. Public Company
While patriotic investors may find comfort codifying their country’s corporate titans, others crave exposure everywhere – including the wee small-caps and micro-players. For those with an itch for exhaustive diversification, the Vanguard Total Stock Market ETF (VTI) stands alone.
“If you want quite literally every single public stock traded in America rolled into one basket, VTI is the only game in town,” said Jonathan Murray, a certified financial planner at VVPS Advisors. “It provides diversification to an extreme, eliminating virtually any unsystematic stock-specific risk.”
Under its sprawling umbrella, the Total Stock Market ETF holds over 3,700 companies spanning the entire US equity universe. From mega-cap tech darlings and industrial juggernauts to tiny biotech upstarts and emerging growth stories, VTI leaves no domestic stone unturned in its pursuit of total market representation.
The tradeoff for such encyclopedic diversification? While still historically excellent, VTI has trailed the S&P 500 by a modest amount over the last decade, generating average annual returns of 11.98%. It’s a difference that could amount to hundreds of thousands separator millions less for a retirement portfolio. But many advisors consider it an acceptable give for extreme risk mitigation.
“For nervous investors who want to participate in the market’s overall growth but can’t stomach any individual disruptors blowing up their portfolio, VTI provides that sleep-at-night reassurance,” Murray stated. “It’s the quintessential low-maintenance, set-it-and-forget-it core holding.”
The Vanguard Growth ETF: Riding the Relentless Waves of Disruption
For the more adventurous souls hungering not just for average market returns but a cut above, Vanguard offers a compelling alternative: the Vanguard Growth ETF (VUG). This 208-stock powerhouse unapologetically targets the market’s fastest-growing, most disruptive innovators.
“VUG is a curated basket of companies driving transformational economic change through emerging technologies, new business models, and addressable market expansions,” explained Carly Johnson, an ETF strategist at Fidelity Investments. “It’s for aggressive investors who want a front-row seat to the innovations reshaping our world.”
The proof is in the performance pudding. Over the past decade, VUG has generated eye-popping average annual returns of 14.74% – a full 2 percentage points above the overall market during that span. With over 55% of its holdings residing in the high-octane technology sector, it has clearly capitalized on the digital revolution’s relentless ascent.
Unsurprisingly, such a growthy, disruptive tilt has produced elevated volatility. Stomach-churning pullbacks and whiplash-inducing rallies are par for the course with VUG. It’s an investment that demands the mental fortitude to endure wild swings in exchange for potentially turbo-charged long-term compounding.
“VUG is a fantastic way for investors with decades until retirement to put high-growth innovation on their side,” Johnson said. “But it’s definitely not for the faint of heart unable to withstand the ups and downs along the journey.”
The Forever Fortunes: Harnessing Relentless Compounding
Irrespective of which specific Vanguard ETF suits your investing mentality best, the common thread remains an extreme long-term mindset. These aren’t trades to be jumped in and out of – they’re the founding blocks for perpetual wealth accumulation harnessing relentless compounding.
“The biggest, Earth-altering investment fortunes are built by those who can withstand the market’s mood swings and perpetually reinvest their gains throughout their working lives and into perpetuity,” Purnanandam stated emphatically. “It requires almost inhuman discipline initially, but the payoff grows more unbelievable by the decade.”
By continually dollar-cost averaging into these battle-hardened index trackers and letting the magic of compounding work across 30, 40, or 50 years, even relatively modest monthly investments can reasonably blossom into eight-figure nest eggs. Those who stay the course stand to reap generational, dynasty-solidifying wealth.
So whether prioritizing the time-tested comforts of the S&P 500, hyper-diversification across all public equities, or growth-capturing the economy’s most breathtaking innovators, the path to perpetual prosperity may lie in Vanguard’s forever funds for the forever investor.
