Worried About Stock Market Volatility? This Surefire ETF Can Limit Your Risk While Building Long-Term Wealth
The stock market is no stranger to volatility, but the last couple of weeks have produced some particularly nauseating ups and downs. Many investors, understandably, may be hesitant to invest right now for fear that another downturn could be looming.
To be clear, nobody knows what the market will do in the coming weeks or months. But if you're looking for an investment that has a strong track record of surviving volatility while also helping build long-term wealth, the Vanguard S&P 500 ETF (NYSEMKT: VOO) could be a fantastic buy right now.
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A safer way to weather stock market storms
All stocks can be subject to extreme ups and downs when the market is shaky, even those from solid and healthy companies. But the strongest businesses will be able to survive rough patches while going on to experience long-term growth.
The S&P 500 Index (SNPINDEX: ^GSPC) contains stocks from 500 of the largest and most stable U.S. companies, ranging from tech giants Apple and Microsoft to century-old brands such as Coca-Cola and Procter & Gamble. Many of the stocks within the S&P 500 are industry-leading titans, making them some of the best positioned companies to weather future volatility.
An S&P 500 ETF, such as the Vanguard S&P 500 ETF, is a collection of stocks that tracks the index itself. By investing in just one share of this ETF, you'll instantly own a stake in all 500 companies within the index.
Historically, the S&P 500 has survived every downturn it's ever faced. Even in the last 25 years alone, it's seen record-breaking bear markets, recessions, and crashes -- like the dot-com bubble burst in the early 2000s, the Great Recession, and the COVID-19 crash in 2020.
^SPX data by YCharts
Despite experiencing significant turbulence, however, the index has soared by 265% since January 2000, as of this writing. In other words, if you'd invested in an S&P 500 ETF back then and simply held onto it through all the ups and downs, you'd have more than tripled your money by today.
The Vanguard S&P 500 ETF, specifically, can be a great option because of its low fees. This fund has an expense ratio of just 0.03%, meaning you'll pay $3 per year in fees for every $10,000 in your account. This is far lower than what many competitors charge, which could save you thousands of dollars over time.
How much could you earn over time?
There are never any guarantees in the stock market, and right now, the future is especially unpredictable.
That said, the S&P 500 has been around for many decades, and in that time, its total returns have averaged out to around 10% per year. While you very likely won't see 10% returns every year, historically, the annual earnings have averaged out to roughly 10% per year over time.
For example's sake, let's say that you might earn 8%, 10%, or 12% average annual returns, the latter being more in line with the index's performance over the past decade. If you were to invest, say, $200 per month, here's approximately how that might add up after a few decades:
| Number of Years | Total Portfolio Value: 8% Avg. Annual Return | Total Portfolio Value: 10% Avg. Annual Return | Total Portfolio Value: 12% Avg. Annual Return |
|---|---|---|---|
| 20 | $110,000 | $137,000 | $173,000 |
| 25 | $175,000 | $236,000 | $320,000 |
| 30 | $272,000 | $395,000 | $579,000 |
| 35 | $414,000 | $650,000 | $1,036,000 |
Data source: author's calculations via investor.gov.
Even if the S&P 500 earns below-average returns, you could still earn hundreds of thousands of dollars over time by investing $200 per month. The more you can afford to contribute or the longer you allow your money to grow, the more you can potentially earn.
The market may be shaky right now, but if history is anything to go by, its long-term future is incredibly promising. The Vanguard S&P 500 ETF is one of the safer investment options, but with enough time, you can potentially build life-changing wealth.
Should you invest $1,000 in Vanguard S&P 500 ETF right now?
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Katie Brockman has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Apple, Microsoft, and Vanguard S&P 500 ETF. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
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