The Best Stock ETF to Invest $100 in Right Now

If you have $100 to invest, what should you do with it? There are a host of answers, but the simplest solution is to buy the Vanguard S&P 500 ETF (NYSEMKT: VOO). That's the equivalent of saying you should buy the market, which is the advice that superstar investor Warren Buffett has long given.

But should you do that right now, with so much uncertainty at the moment and the market trading less than 5% from all-time highs? Yes, and here's why.

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It wasn't much of a drawdown

The stock market goes through different phases, generally referred to as bull markets and bear markets. All those two terms really mean is that the market, over time, trends upward (bull) and downward (bear).

Currently, it's in a bull market, although it's been a particularly volatile one thanks to geopolitical turmoil and economic worries. And the volatility may not be over yet.

Image source: Getty Images.

What is pretty clear, however, based on previous time periods that have mimicked this one, is that this period of volatility wasn't all that severe. There were a few months of poor performance, but the stock market is already nearly back to where it was before the decline started. The short-term pullback has done little to change the lofty valuations currently afforded to many stocks.

Data by YCharts.

That means that investors looking to put money into the market today are still likely paying a premium price, and that's not necessarily ideal. But if you think in decades and not days when it comes to your investment choices, the longer-term history of the market is pretty clear: Buying an S&P 500 (SNPINDEX: ^GSPC) index fund like the Vanguard ETF referenced above is a winning long-term strategy. That remains true even if you buy when the market is expensive.

Buy the Vanguard S&P 500 ETF with $100

The truth is, if you buy the Vanguard S&P 500 ETF today, you could end up losing money in the near term. But that same statement would be true no matter when you bought the exchange traded fund (ETF). It would be true if you bought an individual stock or a mutual fund. The market goes up and down all the time.

Yet there's one trend that has seemed to hold true over longer time periods -- that the market generally heads higher over the long term. While you may lose money in the short term if you buy this Vanguard ETF and you stick with the investment, you're highly likely to end up with gains.

Even better would be to put your $100 in today and then add to it each and every month no matter what's going on. This will allow you to benefit from dollar-cost averaging. Don't forget to set up dividend reinvestment, too, so you compound your growth over time.

Data by YCharts.

There are three powerful steps outlined here, no matter what uncertainty there is in the market. First, get started as soon as you can. Second, keep saving and investing. And third, make sure your investments are working as hard as possible for you by reinvesting the dividends. The one thing that doesn't play a major role in this plan is the price level of the market.

The graph above shows the price-only return and the total return, which assumes dividend reinvestment. It looks like the market just goes up and up over time -- and that's largely been true. But look at the graph below, which shows that some of the smallish bumps in the price line were actually huge drawdowns.

Data by YCharts.

Those periods are hard to live through, but you have to take the two graphs together. The market has historically recovered from deep downturns and gone on to chart even higher highs. That's why you should consider buying the Vanguard S&P 500 ETF if you have $100 to invest today.

Don't get caught up in the daily ups and downs of the market -- just invest

Famed investor Warren Buffett has long suggested investors just buy the S&P 500 index. The reason is that it gets an investor into the market, which is a powerful way to grow wealth over time.

Yes, there are better buying points and worse ones. Today is probably a worse one.

However, as the charts above show, it's far more important that you get started on your investment journey so you can benefit from the long-term growth that investing offers. Just make sure you stick with the Vanguard S&P 500 ETF for the long term, add to your investment as often as you can, and let that dividend compound.

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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.