2 Vanguard ETFs to Buy With $100 and Hold Forever

Vanguard's Total Stock Market ETF (VTI) and Total Bond Market ETF (BND) are presented as a low-cost, effective strategy for long-term investors to build a diversified 60/40 portfolio. VTI offers broad exposure to over 3,500 U.S. stocks, while BND provides access to nearly 11,400 taxable investment-grade U.S. dollar bonds, both featuring ultra-low 0.03% expense ratios. This 60/40 allocation has historically yielded an attractive 8.8% annual return while significantly reducing volatility, making it an ideal set-and-forget approach for balancing growth and risk.

Analysis

The article presents a compelling case for a low-cost, diversified 60/40 portfolio strategy utilizing the Vanguard Total Stock Market ETF (VTI) and the Vanguard Total Bond Market ETF (BND) for long-term investors. This approach aims to balance growth potential from equities with stability and income from fixed income, leveraging Vanguard's investor-owned structure to provide ultra-low expense ratios of 0.03% for both funds.

VTI offers broad exposure to over 3,500 U.S. stocks, tracking the CRSP US Total Market Index, with significant allocations to mega-cap technology firms like Nvidia (6.5%) and Microsoft (6.1%). It has delivered a robust 9.2% annualized return since its inception in 2001, closely mirroring its benchmark.

BND provides access to nearly 11,400 taxable investment-grade U.S. dollar bonds, including U.S. Treasuries and corporate debt, currently yielding over 4%. While its 3.1% annualized return since 2007 is lower than VTI's, BND's role is primarily to diversify and reduce portfolio volatility, as evidenced by the 60/40 mix's historical worst annual return of -26.6% compared to -43.1% for 100% stocks.

Historically, the 60/40 allocation has achieved an attractive 8.8% average annual return, demonstrating its effectiveness in providing growth while significantly mitigating downside risk. The combination of broad market exposure, diversification, and minimal fees positions this strategy as a robust, 'set-and-forget' option for long-term wealth accumulation.

Key Decisions for Investors

• Consider the Vanguard 60/40 VTI/BND portfolio as a foundational, low-cost strategy for long-term diversification and balanced risk-adjusted returns.
• Evaluate the historical performance of the 60/40 allocation, noting its 8.8% average annual return and reduced volatility, to align with individual risk tolerance and investment horizons.
• Utilize the ultra-low 0.03% expense ratios of VTI and BND to maximize net returns, recognizing the significant impact of fees over extended investment periods.