Just keep it simple. It's great advice that applies to many situations throughout life. Today, let's focus on how keeping it simple can lead to excellent investing returns. Here are my two picks for simple exchange-traded funds (ETFs) that anyone can buy and hold forever for only $1,000.
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Vanguard Growth Index Fund ETF
First up is the Vanguard Growth Index Fund ETF (VUG 1.90%). For those investors who want to set it and forget it, the Vanguard Growth ETF is an attractive choice. The fund focuses on large-cap growth stocks, so, unsurprisingly, it's heavily weighted toward the "Magnificent Seven."
VUG Total Return Level data by YCharts
Indeed, Nvidia, Apple, Microsoft, Alphabet, Meta Platforms, Amazon, and Tesla comprise over 54% of the fund's total holdings. However, that shouldn't be a reason to avoid this fund. Given those stocks' large weighting within key benchmark indexes, like the S&P 500, the Vanguard Growth ETF is a solid choice for most portfolios.
In fact, not only has the fund kept up with the performance of the benchmark index over the last 10 years, the fund has beat it. Dating back to 2015, the fund has generated a compound annual growth rate (CAGR) of 14.2%, besting the S&P 500's CAGR of 12.5%.
What's more, investors can tap into this outperformance at an extremely low cost. The fund charges an expense ratio of 0.04% -- making it one of the cheapest ETFs around. For example, a person who invests $10,000 in the fund will pay only $4 a year in fees. Given its low fees and solid performance, long-term investors should give strong consideration to this simple ETF.
Vanguard High Dividend Yield Index Fund ETF
Next is the Vanguard High Dividend Yield Index Fund ETF (VYM 1.55%). While the Vanguard Growth ETF is perfect for growth-seeking investors or those with many years until retirement, the Vanguard High Dividend Yield Index ETF offers up a different proposition. This fund is focused on delivering income for its investors, so its holdings reflect an income-oriented approach with plenty of value stocks.
Its top holdings list would make Warren Buffett proud, with stocks like Bank of America, Coca-Cola, and Chevron, along with other iconic companies like JPMorgan Chase, Broadcom, Walmart, ExxonMobil, and Procter & Gamble.
As evidenced by its holding list, there are many stocks from the financial, energy, and healthcare sectors. Many of these stocks pay dividends. Consequently, the fund generates a decent amount of income that is then distributed to its investors.
As of this writing, the fund boasts a dividend yield of 2.9%. Although this isn't the highest dividend yield investors can find among ETFs, there are reasons that income-seeking investors may still want to consider this fund. Most notably, it boasts a rock-bottom expense ratio of 0.06%. That means investors keep more of their hard-earned money at work, as they will pay only $6 a year in fees for every $10,000 invested in the fund.
With its combination of well-respected value stocks, solid dividend yield, and low fees, investors wanting to keep it simple would be wise to choose this fund.
