3 Vanguard ETFs to Buy With $1,000 and Hold Forever

Vanguard ETF are some of the most popular exchange-traded funds among investors, and for good reasons. Not only are there Vanguard ETFs that allow you to invest in virtually any stock market index, sector, or category of stocks, fixed-income, or commodities you want, but Vanguard funds give everyday investors a cost-effective way to do it.

Some Vanguard ETFs have expense ratios as low as 0.03%, which means the annual costs of a $1,000 investment are just $0.30. To be clear, an ETF's expense ratio isn't a fee you have to pay. It will simply be reflected in the fund's performance over time.

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As of this writing, there are 88 different Vanguard ETFs listed on the firm's website. And to be clear, there's a solid investment case to be made for most of them, especially for long-term investors trying to build a diversified portfolio. However, there are some that could be better ways to put your $1,000 to work than others. Here are three in particular that look interesting right now.

This Vanguard ETF always deserves a spot on the list

Regardless of stock market conditions or the economic climate, it's tough to make the case against owning the Vanguard S&P 500 ETF (NYSEMKT: VOO) as a long-term investment. This ETF tracks the S&P 500 benchmark index, which is widely considered to be the best overall barometer of how the U.S. stock market is doing.

VOO Total Return Price data by YCharts

Over long periods of time, the S&P 500 has produced annualized returns of 9%-10%, depending on the exact period you're looking at. To put this in perspective, a $1,000 investment compounded at 10% for 40 years would be worth more than $45,000. Now imagine if you invest $1,000 in the S&P 500 at regular intervals over time. It's important for new investors to realize that not all stock market millionaires get that way by choosing individual stocks. Many get there by simply buying the S&P 500, investing regularly, and holding for a long time.

An asset class with excellent return potential

While real estate is one of the official stock market sectors, it is often considered to be a different asset class than stocks. The Vanguard Real Estate ETF (NYSEMKT: VNQ) tracks an index mostly composed of real estate investment trusts, or REITs (pronounced "reets"). Just to name a few of the largest REITs you might have heard of, Prologis (NYSE: PLD) owns over a billion square feet of warehouses, Public Storage (NYSE: PSA) owns thousands of self-storage properties, and Simon Property Group (NYSE: SPG) owns some of the busiest shopping malls in the world.

In order to be classified as a REIT, a company must distribute at least 90% of its taxable income to shareholders, which makes these excellent dividend stocks. As of this writing, the Vanguard Real Estate ETF has a dividend yield of about 3.8%. Over the long term, the combination of dividend income and appreciation of real estate values can result in excellent total returns.

A valuation gap and strong tailwinds

Last but certainly not least, the Vanguard ETF I have been buying for my own portfolio recently is the Vanguard Russell 2000 ETF (NASDAQ: VTWO). This tracks the Russell 2000 index, which is the most popular index of small cap stocks in the market.

There are a few reasons why the Russell 2000 looks especially attractive right now. For one thing, small caps can be major beneficiaries of falling interest rates, as smaller companies (as a group) are more debt-reliant than their large-cap counterparts. They could also be big winners of the Trump administration's efforts to reduce regulations on businesses.

It's also worth mentioning that small cap stocks are trading for their lowest valuations on a price-to-book basis, relative to large caps, in over 25 years. The average Russell 2000 stock trades for a price-to-book multiple of 2.0, while the typical S&P 500 component has a P/B of 4.8. The last time the valuation gap was this wide was in 1999, and small caps went on to outperform for more than a decade.

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Matt Frankel has positions in Prologis, Public Storage, Simon Property Group, Vanguard Real Estate ETF, Vanguard Russell 2000 ETF, and Vanguard S&P 500 ETF and has the following options: short February 2025 $110 puts on Prologis. The Motley Fool has positions in and recommends Prologis, Simon Property Group, Vanguard Real Estate ETF, and Vanguard S&P 500 ETF. The Motley Fool recommends the following options: long January 2026 $90 calls on Prologis. The Motley Fool has a disclosure policy.