My Top ETF to Buy and Hold Forever – The Motley Fool

The stock market is a wealth-building machine, and investing is one of the easiest and most effective ways to increase your net worth over time. However, choosing the right investments is critical.

While it can be tempting to invest in short-term stocks with the potential for explosive growth, those investments can be incredibly risky. A safer (and more profitable) option is to invest in solid long-term investments that are more likely to see consistent growth over time.

There’s no one-size-fits-all investment that will be right for everyone, but there is one ETF that I plan to hold for as long as possible: the Vanguard S&P 500 ETF (VOO -3.43%).

Why invest in an S&P 500 ETF?

An S&P 500 ETF is a fund that tracks the S&P 500 index itself, meaning it includes the same stocks and mirrors its performance. The index includes stocks from 500 of the largest companies in the U.S., including many household names like Amazon, Apple, and Tesla.

Perhaps the strongest feature of an S&P 500 ETF is its ability to survive periods of market volatility. No investment is immune to short-term market downturns, but the S&P 500 has a long history of recovering from crashes, bear markets, recessions, and everything in between.

Because the Vanguard S&P 500 ETF tracks the index itself, it will mirror its performance. That means if we face a deeper recession or the market crashes, it’s extremely likely this ETF will recover eventually.

How much can you earn with an S&P 500 ETF?

Despite being a relatively safe investment, S&P 500 ETFs have the potential for substantial returns over time.

Historically, the index itself has earned an average rate of return of around 10% per year. In other words, while you’ll likely see higher or lower returns year-to-year, those annual returns should average out to around 10% per year over time.

Say, for example, you’re investing $200 per month in an S&P 500 ETF and you’re earning a 10% average annual return. Here’s approximately how much you could earn over time, depending on how many years your investments have to grow.

Source: Author’s calculations via Investor.gov

Time is your most valuable asset when it comes to investing, and the longer you give your money to grow, the more you can potentially earn.

While you won’t become a millionaire overnight with an S&P 500 ETF, it is possible to accumulate $1 million or more over time. By investing consistently for as many years as possible, you could earn more than you might think.

Is this investment right for you?

The S&P 500 ETF is a fantastic option for those who want a hands-off investment with the potential for substantial returns over time. You never need to worry about when to buy or sell, and it’s much less research-intensive than investing in individual stocks.

The downside, however, is that you can only earn average returns. The Vanguard S&P 500 ETF aims to follow the market, which means it’s impossible for it to beat the market. You can still earn a significant amount over time, but if beating the market is one of your primary goals, you may be better off buying individual stocks.

S&P 500 ETFs are relatively safe, healthy investments that can help generate wealth that lasts a lifetime, and the Vanguard S&P 500 ETF will remain in my portfolio for the long haul. By weighing the pros and cons of this investment, it will be easier to decide whether it’s the right fit for you.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Katie Brockman has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Amazon, Apple, Tesla, and Vanguard S&P 500 ETF. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.