2 Vanguard ETFs to Buy With $500 and Hold Forever

Key Points

• Investing in exchange-traded funds is a convenient way for the average person to invest and reduce risk.

• The Vanguard High Dividend Yield ETF routinely has a dividend yield that's double the S&P 500's average.

• The Vanguard Total International Stock ETF can help hedge against downturns in the U.S. market.

• 10 stocks we like better than Vanguard Whitehall Funds - Vanguard High Dividend Yield ETF ›

Investing can sometimes be viewed as complicated because some people think being a good investor involves tons of research or time. In actuality, being a successful investor can be as simple as investing in exchange-traded funds (ETFs).

There are thousands of ETFs investors can choose from today. Some focus on specific industries, some focus on companies of particular sizes, some focus on geographic reasons, and some focus on investment types (value, growth, dividend, etc.).

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

If you have $500 available to invest -- meaning you have an emergency fund saved and high-interest debt paid down -- the following two Vanguard ETFs are good choices. They have two different focuses and can be complementary pieces in your stock portfolio.

Image source: Getty Images.

1. Vanguard High Dividend Yield ETF

When it comes to making money from stocks, most people focus on stock price appreciation, but that's only one means. The other way to benefit from owning stocks is via dividends. Not only are dividends guaranteed (in most cases), but they also provide a cushion during market downturns -- which isn't far-fetched given how overvalued the market seems right now.

One dividend-focused ETF I recommend is the Vanguard High Dividend Yield ETF (NYSEMKT: VYM). With a current yield of just over 2.5%, it's more than double the S&P 500 average, but slightly below its average over the past five years.

VYM Dividend Yield data by YCharts

VYM holds 580 large-cap stocks spanning all major sectors. The top five represented sectors are financials (21.6% of the ETF), industrials (13.6%), technology (12.3%), healthcare (11.6%), and consumer discretionary (10.1%).

With maybe the exception of the technology sector, many of the top companies in these sectors are known for their stable cash flow and shareholder-friendly dividends. When you invest in VYM, you're getting exposure to blue chip companies like JPMorgan Chase, ExxonMobil, Walmart, Johnson & Johnson, and Coca-Cola.

Although cash payouts from dividend stocks can be good, the real power comes from reinvesting those dividends (via a dividend reinvestment plan) to acquire more shares. At its current yield, a $500 investment would only pay out $12.50 annually, which is far from life-changing. However, if you were to reinvest your payout over time, you could set yourself up nicely down the road.

2. Vanguard Total International Stock ETF

Part of having a diversified portfolio is investing in companies outside of America. American companies, particularly in the S&P 500, have been some of the best-performing stocks over the past few decades, but you don't want to put all your eggs in one basket, no matter how strong the past or bright the future looks.

An international ETF I recommend is the Vanguard Total International Stock ETF (NASDAQ: VXUS) because it covers a lot of ground. It holds over 8,600 stocks in both developed and emerging markets, providing you with the best of both worlds.

Developed markets typically have more mature financial markets and established economies, so stocks from there tend to be more stable. Examples of non-American countries that fit this description are the U.K., Japan, Australia, Germany, and Canada.

Emerging markets are still growing, maturing, and industrializing, so stocks from there are often more volatile, but that comes with more upside in many cases. Examples of countries that fit this description are Brazil, India, Mexico, China, and South Africa. Here's how the ETF is divided by region:

• Europe: 39%
• Emerging markets: 27.2%
• Pacific: 25.4%
• North America: 7.7%
• Middle East: 0.7%

I don't recommend having a large part of your portfolio in international stocks, but a small portion is a good way to hedge against any potential downturns in the U.S. economy. A $500 investment would be a good way to start building an international stake.

Should you invest $1,000 in Vanguard Whitehall Funds - Vanguard High Dividend Yield ETF right now?

Before you buy stock in Vanguard Whitehall Funds - Vanguard High Dividend Yield ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard Whitehall Funds - Vanguard High Dividend Yield ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $672,879!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,086,947!*

Now, it’s worth noting Stock Advisor’s total average return is 1,066% — a market-crushing outperformance compared to 186% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of September 8, 2025

JPMorgan Chase is an advertising partner of Motley Fool Money. Stefon Walters has positions in Coca-Cola and Vanguard Total International Stock ETF. The Motley Fool has positions in and recommends JPMorgan Chase, Vanguard Total International Stock ETF, Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF, and Walmart. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.