1 Vanguard ETF to Buy Every Time the Market Dips
Key Points
The long-term trajectory of the S&P 500 is tied to the trajectory of the U.S. economy.
The S&P 500 has recovered from every recession the U.S. has endured.
The high concentration of tech stocks means tech dips end up becoming S&P 500 dips.
- 10 stocks we like better than Vanguard S&P 500 ETF ›
There's one thing for sure about the stock market: It will always be volatile. Always has been, always will be -- it's part of its DNA. Unfortunately, part of that volatility involves stock prices dropping, but it doesn't always have to be a bad thing. Market dips can be a great time to buy good investments at a discount (or at least cheaper than they were).
One Vanguard exchange-traded fund (ETF) I load up on when the market dips is the Vanguard S&P 500 ETF (NYSEMKT: VOO). It's a one-stop shop that I don't have to second-guess. This exchange-traded fund (ETF) is led by blue chip companies and has stood the test of time.
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I'll always bet on the U.S. economy to bounce back long term
The S&P 500 is naturally tied to the U.S. economy because the companies in the index drive much of the country's economic activity. You can never 100% guarantee anything with the stock market, but one of the surest bets you can make is that the S&P 500 will go up over time.
It will undoubtedly hit some rough patches along the way, but its long-term trajectory is positive. The Vanguard S&P 500 ETF has been around only since September 2010, but if we look at the S&P since some of the worst recessions in the country's history, it has always bounced back.
As of market close on April 27, the index is up over 7,200% since its trough during the 1980 recession (dating from March 1980); over 820% since its trough during the dot-com bubble (beginning in October 2002), and 220% since its trough during the pandemic (from March 2020).
^SPX data by YCharts. Gray vertical lines indicate U.S. recessions.
Of course, there was no way to know it was the trough at the time, but the larger point is that after each downturn, the S&P 500 bounced back with the U.S. economy. Those who stay the course and continue investing are often rewarded over time.
Tech dips have become market dips
The Vanguard ETF gives you a low-cost way to instantly invest in some of the world's top companies. It includes every major U.S. sector, but much of its performance depends on big tech (like the "Magnificent Seven" stocks), given how much of the ETF it accounts for. Here are its 10 largest holdings:
- Nvidia: 7.58% of the ETF
- Apple: 6.66%
- Microsoft: 4.92%
- Amazon: 3.64%
- Alphabet (Class A): 2.99%
- Broadcom: 2.62%
- Alphabet (Class C): 2.40%
- Meta: 2.24%
- Tesla: 1.87%
- Berkshire Hathaway (Class B): 1.57%
Although much of these stocks' recent success has come at the hands of the current AI boom (except Berkshire Hathaway), I trust these companies as a whole to bounce back after market dips. If there's a chance to go discount shopping for shares of the Vanguard S&P 500 ETF, I take the opportunity.
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Stefon Walters has positions in Apple, Microsoft, and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Broadcom, Meta Platforms, Microsoft, Nvidia, Tesla, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
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