In my opinion, among exchange-traded fund (ETF) issuers, Vanguard stands above the rest. At the end of 2025, the company had the second-largest assets under management (AUM) at $2.64 trillion, second only to BlackRock. Meanwhile, Vanguard has always been a leader in budget investing, with a focus on index funds.
While I’m a stock picker at heart, I believe one of the best investments most people can make is an index ETF. And Vanguard’s low costs and high liquidity make it one of the best index ETFs out there.
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How Vanguard Index ETF Helps Build Long-Term Wealth
The fact is that over the past decade, the S&P 500 has outperformed more than 85% of actively managed large-cap funds. One reason for this is expense, and the expenses of actively managed funds can significantly reduce investor returns over time.
Vanguard S&P 500 ETF (NYSEMKT: VOO), which tracks the index, has an expense ratio of just 0.03%. This means you only pay $0.30 for every $1,000 invested. Essentially, this allows you to keep almost all of your profits, which becomes increasingly important as your portfolio balance grows over time.
Another important reason why market-cap-weighted index funds, such as the Vanguard S&P 500 ETF, tend to outperform actively managed funds is that they do the exact opposite of what most fund managers invest. Fund managers typically trim their best-performing positions in the name of risk management, but at the same time, they also double down on their “best ideas” after they pull back.
Market-cap-weighted indices like the S&P 500 do the opposite. They allow the winners to continue to grow and take a larger share of their assets, while they allow the losers to naturally fade away.
This Darwinian “survival of the fittest” approach works because the market isn’t really driven by a large group of stocks that are rising, but by a handful of mega-winners. A J.P. Morgan chase The study found that between 1980 and 2020, more than 40% of stocks Russell 3000 had negative absolute returns, while about 10% accounted for overall market performance.
That’s why using the Vanguard S&P 500 ETF as a core asset in which you consistently invest on a dollar-cost average over a long period of time is one of the best ways to build long-term wealth. The ETF is a proven winner with an average annual return of 15.5% over the past decade. If you were to invest $1,000 a month over that period, you would have over $270,000 by the end of that period, but with similar returns over 30 years, that figure would jump to over $6 million, with 94% of that coming from earnings.
Should you buy the Vanguard S&P 500 ETF right now?
Before you buy shares of the Vanguard S&P 500 ETF, consider this:
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JPMorgan Chase is an advertising partner of Motley Fool Money. Jeffrey Seiler has positions in the Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends the BlackRock, JPMorgan Chase and Vanguard S&P 500 ETFs. The Motley Fool has disclosure policy.
Vanguard Index Fund Built for Long-Term Wealth May Be Your Smartest Buy Originally Published by The Motley Fool