The S&P 500 (^GSPC +0.80%) is back to all-time highs after a 9% pullback earlier this year. But there’s still a valuation problem.
The Shiller P/E ratio, which is a measure of inflation-adjusted earnings over the past 10 years, is at 40. The only time it has ever been higher was during the tech bubble peak. With the inflation rate back above 3% and still climbing, that number could go even higher.
That doesn’t necessarily mean stocks are a sell, though. S&P 500 earnings are expected to grow by 18% in 2026 and 16% in 2027.
If companies can deliver on those expectations, that should be enough to support stock prices over the next several quarters. Even though valuations are above long-term averages now, there’s still a strong case to be made for long-term buy-and-hold investments.
So if you want to make a $1,000 investment today, you need to find an ETF that’s filled with durable and successful companies that can weather multiple economic cycles and have the financial strength to thrive for decades.
These three Vanguard ETFs offer just that.
Image source: Getty Images.
1. Vanguard S&P 500 ETF
Let’s get the obvious one out of the way first. The Vanguard S&P 500 ETF (VOO +0.82%) invests in 500 of the largest companies in the United States and owns almost every recognizable brand name. This fund has become the biggest ETF in the world because investors realize that the S&P 500 is perhaps the best option to act as the cornerstone of your portfolio.
While there may be questions about how expensive the index currently is or whether it has become too top-heavy and concentrated, it’s important to remember that it evolves over time. If you go back in time, there were periods where energy and financials were the top sector holdings. Go back far enough, and railroads would have had the largest allocation.
As the economy evolves and new winners emerge, the S&P 500 will change to reflect that. It’s a passive index but one that changes as the economy changes.
The one potential drawback is that this ETF invests only in large caps. If you want virtually every investable U.S. company, take a look at the Vanguard Total Stock Market ETF.
2. Vanguard Dividend Appreciation ETF
Income seekers and conservative investors may prefer something a little more “boring.” The Vanguard Dividend Appreciation ETF (VIG 0.42%) owns companies that have paid and grown their annual dividend for at least 10 consecutive years.
Dividend payers are generally companies in a more mature phase of their life cycle. They’re not the fast growers you typically find in the tech sector, but they’re the ones that can ride out almost any economic cycle.
Because of its selection strategy and weighting methodology, this ETF actually has a heavier tech allocation than most dividend ETFs. Within this category, it has more of a growth tilt and a lower-than-average yield.
But the long-term dividend growth requirement also gives it more of a quality tilt. Given how dividend ETFs have lagged the broader market over the past several years, they could be overdue for a longer stretch of outperformance.
3. Vanguard Information Technology ETF
The Vanguard Information Technology ETF (VGT +2.55%) is more of a pure long-term growth play. We’ve seen the potential of this sector throughout the emergence of the artificial intelligence (AI) boom. But this is the area that’s often the source of the next big revolution. It’s the kind of theme that you want exposure to in your portfolio for the long term.
You should expect volatility to be higher than normal. But if you’re willing to ride it out, there’s a good chance you’ll be rewarded with higher returns over the course of years and decades.
Vanguard Information Technology ETF
Today’s Change
(2.55%) $2.59
Current Price
$104.16
Key Data Points
Day’s Range
$102.31 – $104.27
52wk Range
$66.65 – $104.27
Volume
4.1M
In the near term, there is some concern about high valuations diluting some return potential over the next several years. If your holding period is a decade or longer, that becomes less of a concern. The range of possible returns in the near term is wide. Over time, however, the long-term growth narrative tends to matter more.
Vanguard ETF comparison table
| ETF | Ticker | Expense Ratio | Approx. Yield | AUM | 10-Year Ann. Return |
|---|---|---|---|---|---|
| Vanguard S&P 500 ETF | VOO | 0.03% | 1.2% | $818B | 14.1% |
| Vanguard Dividend Appreciation ETF | VIG | 0.04% | 1.7% | $99B | 12.3% |
| Vanguard Information Technology ETF | VGT | 0.09% | 0.4% | $105B | 21.4% |
Data source: Vanguard.
These are funds that can be held individually or collectively. Together, they provide a nice combination of core, defensive, and growth exposures, but all are ETFs that can be held forever.
