The Smartest Vanguard ETF to Buy With $1,000 Right Now

With trillions of dollars in assets under management, coupled with a five-decade operating history, Vanguard is one of the clear leaders in the investment industry. It pioneered low-cost investment products, providing access to the stock market for a large segment of the population.

Vanguard offers many exchange-traded funds (ETFs) to choose from. But here's the smartest one to buy with $1,000 right now.

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Buying the S&P 500

Investors should take a closer look at the Vanguard S&P 500 ETF (NYSEMKT: VOO). It tracks the performance of the S&P 500 index, which is the most closely watched stock market barometer. There are 500 or so large and profitable businesses in this benchmark, providing investors with exposure to the American economy.

Given the notable rise of the tech sector in the past decade, investors must be familiar with the concentration that they are dealing with. For example, the "Magnificent Seven" stocks combined make up 34% of the Vanguard S&P 500 ETF's portfolio. These businesses have generally performed very well in recent times.

Buying this ETF implies that you're bullish on the success of these kinds of companies continuing in the future. Whether it involves secular trends like cloud computing, artificial intelligence, digital advertising, digital payments, online shopping, or streaming entertainment, investors are betting that these tailwinds can drive financial gains going forward.

To be clear, though, every sector is included in the Vanguard S&P 500 ETF. It's a surefire way to achieve adequate stock market exposure utilizing a hassle-free approach.

What will returns look like?

The Vanguard S&P 500 ETF has been a terrific performer. In the past decade, its total return of 321% translates to a compound annual gain of 15.5% (as of Feb. 26). Had you invested $1,000 in late February 2016, you'd have $4,210 today. That sort of performance can really help people build wealth. And investors can have it by paying an expense ratio of only 0.03%.

The trailing 10-year performance is below the S&P 500's 10% average annualized historical total return. Investors must be wondering if there will be a reversion to the mean. Or worse, could returns fall below the average?

No one has any clue. That shouldn't discourage investors from thinking about the long term and still putting money to work, though. The naysayers have been declaring that the market has been expensive for several years now. But the S&P 500 keeps proving them wrong.

In my opinion, technology will continue to drive returns. Add this to capital inflows from passive investors and a rising federal debt level that keeps the economy running hot, and a $1,000 investment in the Vanguard S&P 500 ETF should end up working out quite well.

Neil Patel has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.