S&P 500 Sell-Off: 1 Vanguard ETF I'm Loading Up On Right Now
Key Points
With stock prices falling, now could be a smart time to "buy the dip."
Broad-market ETFs are more likely to thrive over time, despite short-term volatility.
Investing consistently can turn $200 per month into half a million dollars or more.
- 10 stocks we like better than Vanguard Total Stock Market ETF ›
The stock market has taken a beating this year, with the S&P 500 (SNPINDEX: ^GSPC) down by around 5% from its peak, as of this writing. While it can be tempting to stop investing amid all the chaos, right now can actually be a smart buying opportunity.
Lower stock prices mean investors can load up on quality investments while they're essentially on sale. When you "buy the dip" during the market's low periods, you can then set yourself up for substantial gains when stock prices inevitably surge once again.
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Investing in the right places is key, however, as not all stocks will recover from economic rough patches. While all investors will have different priorities and goals, there's one Vanguard ETF I plan to buy and hold for the long haul, regardless of what lies ahead for the market.
Image source: Getty Images.
A surefire ETF that can withstand volatility
If you're looking for a relatively safe and stable investment that's also capable of earning positive long-term returns, the Vanguard Total Stock Market ETF (NYSEMKT: VTI) could be a smart buy right now.
This fund aims to track the performance of the overall stock market, holding around 3,500 stocks of all sizes -- from small corporations to industry-leading juggernauts. It also covers every sector of the market, providing extensive diversification that can help limit risk.
Because this ETF holds a wide variety of stocks, it's less likely that any one stock or industry will significantly affect its long-term performance. Technology is the fund's largest sector, making up around 36% of assets. But even if tech stocks are hit hard, there are thousands of other stocks from more established sectors to provide stability.
Historically, broad-market funds are extremely likely to thrive over many years. The market itself has pulled through countless bear markets, recessions, and crashes over the last century. Because the Total Stock Market ETF tracks the entire market, it also has a bright future.
Building long-term wealth with minimal effort
Volatility is nerve-wracking, but focusing on an investment's long-term potential can make it easier to keep investing through rough patches.
While past performance doesn't predict future returns, it can sometimes be helpful to look at an investment's previous returns to see what it's capable of achieving over time.
The Vanguard Total Stock Market ETF was launched in 2004, and since then, it's earned an average rate of return of around 9% per year. At that rate, say you were to invest around $200 per month. Depending on how many years you can give your money to grow, here's approximately how much you could accumulate in total.
| Number of Years | Total Portfolio Value |
|---|---|
| 20 | $123,000 |
| 25 | $203,000 |
| 30 | $327,000 |
| 35 | $518,000 |
| 40 | $811,000 |
Data source: author's calculations via investor.gov.
It takes time to build a substantial amount of wealth, but this type of investment requires next to no effort on your part. Simply invest whatever you can afford, stay as consistent as possible, then sit back and watch your money grow.
Again, this doesn't mean the short-term will always be smooth sailing. Stock prices could continue falling over the coming months, and your investment might lose value if that happens. But over decades, the Vanguard Total Stock Market ETF is likely to survive volatility and generate lifelong wealth.
Should you buy stock in Vanguard Total Stock Market ETF right now?
Before you buy stock in Vanguard Total Stock Market ETF, consider this:
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Katie Brockman has positions in Vanguard Total Stock Market ETF. The Motley Fool has positions in and recommends Vanguard Total Stock Market ETF. The Motley Fool has a disclosure policy.
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