If I Only Had $500 to Invest, This Is the ETF I'd Buy Right Now
Key Points
The Vanguard Value ETF owns 308 value stocks.
This ETF is likely to perform better than most if interest rates increase.
Value stocks have outgained growth stocks over the long run.
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Warren Buffett's recommendation that many investors are better off putting their money into an S&P 500 (SNPINDEX: ^GSPC) index fund makes sense. Ordinarily, I'd be on the Buffett bandwagon and suggest a low-cost index fund such as the Vanguard S&P 500 ETF (NYSEMKT: VOO).
But is an S&P 500 ETF the best kind of fund to buy right now? I don't think so. If I had only $500 to invest right now, I'd go in a different direction. My pick for the best ETF to buy in today's market is the Vanguard Value ETF (NYSEMKT: VTV).
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Why value offers value
As its name suggests, the Vanguard Value ETF owns value stocks -- 308 of them, to be precise. Its top holdings currently include Micron Technology (NASDAQ: MU), JPMorgan Chase (NYSE: JPM), Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB), Johnson & Johnson (NYSE: JNJ), and ExxonMobil (NYSE: XOM).
Although value stocks and ETFs haven't been top performers over the last decade, that's no longer the case today. Of Vanguard's top 20 highest-returning ETFs in 2026, eight are value funds (including the Vanguard Value ETF).
One factor behind the resurgence of value stocks and funds is that the S&P 500 is priced at a premium. The S&P 500 Shiller CAPE (cyclically adjusted price-to-earnings) ratio, one of the most respected valuation metrics, is at its second-highest level ever.
I especially like the Vanguard Value ETF for the value stocks it holds. Financial stocks make up 21.4% of its portfolio. These stocks are likely to benefit more than most if interest rates rise -- and CME Group's (NASDAQ: CME) FedWatch estimates an 80% chance of the Federal Reserve increasing rates in September, an 86% chance in October, and a 91% chance in December.
But the Vanguard Value ETF outperformed the ETFs that held only financial stocks during the period when interest rates rose in 2022 and 2023. I think one reason why is that the Vanguard Value ETF's diversification into other sectors helps, particularly defensive sectors such as healthcare.
Thinking short-term and long term
The short-term interest rate dynamics make the Vanguard Value ETF my top pick right now. However, I think this fund could also be a good long-term holding.
Multiple studies have found that value stocks outgain growth stocks over long periods. Although that hasn't been the case in recent years, we could see a return to the norm going forward. With a low annual expense ratio of only 0.03%, the Vanguard Value ETF is a great way to invest in a diversified basket of value stocks.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Keith Speights has positions in Berkshire Hathaway and ExxonMobil. The Motley Fool has positions in and recommends Berkshire Hathaway, CME Group, JPMorgan Chase, Micron Technology, Vanguard S&P 500 ETF, and Vanguard Value ETF. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
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