vanguard

Even Warren Buffett, the greatest stock picker of all time, endorses low-cost, broad-market index funds and exchange-traded funds for most retail investors. This is because most investors don’t have the time to deeply research individual stocks, while broader-market indexes tend to win over time, with 8% to 10% long-term returns on average.

While large banks were the first to create index funds for their institutional clients, Vanguard was the first to offer diversified index funds to the public in 1976. Today, Vanguard is one of just a few major asset managers offering accessible, extremely low-cost index funds, costing investors just a handful of basis points in fees.

After the market’s strong recovery from April’s “Liberation Day” tariff fiasco, here’s the Vanguard fund I’d recommend today.

Buy the total market

Today, technology stocks, particularly around the AI buildout, have soared to very high valuations. Interestingly, some of the largest stocks in the world that have gone up the most, defying the law of large numbers, leaving large indexes like the Nasdaq-100 or even S&P 500 (^GSPC 0.53%) the most concentrated they’ve ever been in recent history.

Of course, there is a good reason why growth-oriented, large-cap technology stocks have soared over the past six months and even the last few years: artificial intelligence. The prospect of generative AI could very well lead to the next industrial revolution; meanwhile, only the largest, best-funded, most technically advanced companies likely have a chance to compete. Therefore, it’s no surprise the “Magnificent Seven” stocks only seem to be getting stronger.

That being said, valuation matters, and the widening gulf between the largest tech stocks and smaller stocks in other sectors is huge. Furthermore, once AI technology is honed and widely distributed, every business in every sector of the economy should be able to benefit from GenAI.

So while investors shouldn’t abandon AI tech stocks en masse, now would also be a good time to look at other types of stock in left-behind sectors. That makes this Vanguard ETF an excellent choice today.

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Vanguard Total Stock Market Index Fund

The Vanguard Total Stock Market Index Fund (VTI 0.51%) is my recommendation for index investors looking to put money to work today. As the name implies, this index tracks the entire stock market, including large-, mid-, small-, and even micro-cap stocks — the entire investing universe in the U.S.

Of course, a broad-market index will also have high weightings of the large-cap tech stocks discussed. Yet while investing in the total market index fund will still give investors some exposure to the AI revolution, those stocks will have a smaller weight than other index funds, such as the Vanguard S&P 500 ETF (VOO 0.60%). For instance, in the VTI, the largest stock in the market, Nvidia, has a 6.5% weighting, whereas Nvidia sports a 7.8% weighting in the VOO, which tracks the S&P 500, and a 9.9% weighting in the Invesco QQQ Trust (QQQ 0.73%), which tracks the Nasdaq-100.

Meanwhile, the total market fund will give a larger weight to smaller stocks in other cheaper sectors of the economy, which may outperform if there is a rebalancing and reversion to the mean. This is what happened in the early 2000s, when technology stocks crashed over the course of three years, but cheaper value stocks in other sectors of the market went on to outperform.

Currently, the VTI trades at a weighted average 27.2 times earnings, with a 1.14% dividend yield. It has risen 13.9% year to date, which is a strong performance, albeit behind that of the VOO and QQQ. Its expense ratio is 0.03%, which is so minuscule the fund is practically free.

Torn between momentum and value? Buy everything

The VTI is therefore a nice middle ground between those who are enthusiastic about the general prospects for AI technology, but are squeamish about tech stocks’ sky-high valuations relative to lower-priced sectors today. Therefore, it’s a great choice for investors looking to allocate money to stocks in October as part of their investment plan.

Exchange-traded fund (ETF) investing removes the guesswork from portfolio construction. Rather than researching dozens of companies and hoping your picks outperform, ETFs deliver instant diversification across hundreds or thousands of stocks with a single purchase. The costs stay low — often just a few dollars per $10,000 invested each year — and ETFs eliminate the mistakes that hurt individual stock pickers who panic during market drops or chase hot stocks at the wrong time.

Among fund families, Vanguard deserves special attention. Fund investors actually own the management company itself, which means Vanguard works for shareholders instead of outside profit-seekers. This setup keeps costs far below what most competitors charge. Lower costs mean more money stays in your account, and those savings add up to significantly higher returns over decades.

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Three Vanguard ETFs stand out as core holdings for investors building wealth over time. Here’s a brief overview of each fund and how it may fit into a well-diversified portfolio.

The everything U.S. stock fund

Vanguard Total Stock Market ETF (VTI 0.47%) tracks nearly 100% of the investable U.S. equity market through ownership of roughly 3,500 stocks spanning large-cap giants down to tiny specialists. The fund captures the full range of American business — from Nvidia powering the artificial intelligence (AI) revolution at 6.5% of assets to small regional banks and industrial firms that barely move the needle individually but collectively represent substantial economic activity.

The Vanguard Total Stock Market ETF sports an expense ratio of just 0.03% annually while delivering a 1.11% annualized yield and 14.7% average returns over the past 10 years. That outstanding performance reflects the advantage of owning everything rather than trying to pick winners.

Furthermore, the fund automatically adjusts as companies grow or shrink, ensuring Microsoft and Apple earn their positions through market performance rather than manager guesswork. For investors seeking one fund that covers the entire U.S. market, the Vanguard Total Stock Market ETF delivers complete coverage at rock-bottom cost.

The global diversification play

Vanguard Total International Stock ETF (VXUS 0.86%) covers what U.S.-only portfolios miss. The fund holds over 8,600 stocks from developed and emerging markets outside the U.S., creating exposure to economies and industries where American companies operate less.

Top holdings include Taiwan Semiconductor Manufacturing at 2.46% — the world’s leading chip manufacturer — along with Chinese tech giants Tencent and Alibaba, European leaders like ASML and SAP, and thousands of mid-sized firms across Asia, Europe, and Latin America.

The Vanguard Total International Stock ETF costs just 0.05% per year, delivers a 2.78% yield that runs well above most domestic funds, and has posted 8.4% average annual returns over the past 10 years. International stocks have trailed U.S. returns recently, but these markets trade at cheaper prices and offer diversification benefits when domestic momentum eventually reverses.

The fund’s massive holding count prevents too much concentration in any single company, while the higher yield provides current income that can be reinvested or spent. For portfolios weighted too heavily toward U.S. stocks, this fund provides geographic balance.

The technology concentration play

Vanguard Information Technology ETF (VGT 0.77%) narrows its focus to the main sector driving market returns — technology. The fund holds roughly 316 stocks classified under information technology — software, hardware, semiconductors, and IT services — with Nvidia, Microsoft, and Apple combining for about 44% of total assets. That concentration creates higher ups and downs but also captures the ongoing shift toward digital infrastructure, AI, and cloud computing that defines modern economic growth.

The Vanguard Information Technology ETF charges 0.09% annually, yields just 0.4% as tech companies reinvest cash into growth rather than paying dividends, and has delivered exceptional 23.4% average annual returns over the past 10 years. That performance reflects tech dominance — technology now makes up roughly 30% of the benchmark S&P 500, and this fund provides pure exposure without watering it down with utilities or consumer staples.

The risk comes from concentration. When tech sells off, this fund falls harder than diversified alternatives. But for investors who believe software continues taking over more industries and AI represents real change rather than hype, this fund offers direct access to the companies building that future.

Vanguard has built a business with the long-term investor in mind. Investors in its funds aren’t just clients, but part owners of the company. That’s why it has some of the lowest fees in the industry, as it passes profits on to its investors through lower fees on its funds.

You can buy and hold most Vanguard funds forever. A great pairing is the Vanguard Total Market Index (VTI -2.69%) and the Vanguard Total Bond Market ETF (BND 0.40%), as together they cover both major asset classes: stocks and bonds. With these two ETFs, you can build a simple 60/40 portfolio — $60 into VTI and $40 into BND for every $100 invested. Here’s why this is an ideal combination for long-term investors.

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The 60/40 portfolio

Investing in stocks is a great way to grow your wealth over the long term. However, stocks can be volatile. That’s why most financial advisors recommend that investors further diversify their portfolio by adding some bonds into the mix.

We can see how increasing a portfolio’s allocation to bonds can steadily lower the risk of having a terrible year:

Data source: Vanguard. NOTE: Return calculations from 1926 through 2024.

The sweet spot has historically been the 60/40 mix. It offers an attractive return (8.8% annually) while significantly reducing volatility and risk.

Broad exposure to the U.S. stock market

The Vanguard Total Stock Market ETF is one of the simplest ways to invest in the stock market. It tracks the CRSP US Total Market Index, which measures the performance of all stocks on the major U.S. exchanges. The fund currently holds over 3,500 stocks, providing investors with broad exposure to the entire U.S. market.

It doesn’t buy the same amount of every single stock. It holds more of the largest companies by market cap. Its top five holdings currently are:

1. Nvidia (6.5% allocation)
2. Microsoft (6.1%)
3. Apple (5.6%)
4. Amazon (3.5%)
5. Meta Platforms (2.6%)

That allocation provides greater exposure to the largest and most dominant companies in the country.

This ETF has produced solid returns throughout its history:

Data source: Vanguard.

As the chart shows, the fund’s returns have closely tracked those of the benchmark index it follows. That’s due to its ultra-low ETF expense ratio of 0.03%. At that rate, it would only cost you about $0.02 in management fees each year for every $60 you invest in the fund.

Broad exposure to the U.S. bond market

The Vanguard Total Bond Market Fund provides investors with broad exposure to the taxable investment-grade, U.S. dollar-denominated bond market. The fund holds high-quality bonds issued by the U.S. government, corporations, and foreign entities. It excludes tax-exempt bonds (e.g., municipal bonds), inflation-protected bonds (e.g., I-Bonds and TIPS), and non-investment-grade bonds (e.g., junk bonds).

This fund currently holds nearly 11,400 bonds with varying maturities (averaging over eight years) from numerous issuers, including U.S. Treasury securities, government-backed mortgages, corporations, and foreign entities.

Bonds provide investors with several benefits. They generate fixed income from bond interest payments (BND currently has a yield of more than 4%). They also help diversify a portfolio, thereby lowering its risk profile.

However, bonds do have much lower returns compared to stocks, especially in more recent decades due to lower interest rates:

Data source: Vanguard.

This ETF also does an excellent job of mirroring the returns of its benchmark, thanks to its ultra-low fees (0.03% ETF expense ratio). At that rate, you’d only pay $0.01 per year in fees for every $40 invested in the fund. The low fees enable investors to keep more of the interest income generated by the bonds held by the fund.

A great pairing

These two Vanguard ETFs complement each other well, offering a balanced approach between risk and reward. The Vanguard Total Stock Market ETF provides broad exposure to the U.S. stock market, while the Vanguard Total Bond ETF offers access to high-quality U.S. dollar bonds. This combination enables investors to participate in the growth of stocks while receiving income and stability from bonds. Investing $100 in these two Vanguard ETFs is a truly set-and-forget investment strategy.

Exchange-traded funds (ETFs) are one of the best investments for those looking for lower-effort ways to get involved in the stock market, and the right investment can help you build long-term wealth while barely lifting a finger.

But with some investors worried about potential volatility, it can be tough to choose the right ETF. While there’s no single best investment for every portfolio, there are a few good reasons why the Vanguard High Dividend Yield ETF (VYM -2.00%) could be a great buy in 2025.

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1. Its diversification can help limit risk

The Vanguard High Dividend Yield ETF contains 579 stocks, which are fairly evenly allocated across 10 different industries. It’s most heavily allocated to the financials sector, representing close to 22% of the fund.

This level of diversification can help mitigate risk. In general, the more stocks you own across a wider variety of industries, the safer your portfolio will be. There are limits to diversification, but if you’re investing in hundreds of stocks across 10 industries, your portfolio won’t be crushed if a handful of stocks or even an entire sector is hit hard in a market downturn.

One thing that makes this fund somewhat different from many other ETFs is its lighter allocation toward tech stocks at only 12% of the fund — compared to, for example, the Vanguard S&P 500 ETF, which devotes over 33% of the fund toward tech.

Tech stocks often deliver higher returns than those from other sectors, but they can also be highly volatile. Relying less on this industry can help reduce risk and short-term turbulence, which can be a major advantage in periods of uncertainty.

2. It offers consistent performance

This ETF won’t experience the same returns as, say, a high-powered growth ETF, and that’s OK. Each fund has its own unique strengths and weaknesses, and the High Dividend Yield ETF’s biggest strength is consistency.

All the stocks in this fund have a history of delivering high dividend yields year after year. Companies with strong dividend payouts are often more mature and established than their younger and more volatile counterparts, as the latter are generally more focused on growing and stabilizing the business than paying out dividends.

This doesn’t mean that these companies won’t face shakiness in the near term, especially during a market downturn. But many of the stocks in this ETF have a decades-long track record of recovering from even the most severe economic rough patches while still paying out consistent dividends to shareholders.

3. Its high dividend can generate passive income

Perhaps the biggest advantage of investing in a dividend ETF is the dividend income itself. This fund most recently paid out a quarterly dividend of around $0.84 per share, and while that may not sound significant, it adds up when you accumulate dozens or hundreds of shares over time.

Dividend ETFs can be particularly strong investments during periods of market uncertainty. Besides the general consistency and diversification that this fund offers, you can also rely on it as a steady source of passive income via dividend payments. While you can reinvest those dividends back into the fund, you can also choose to cash them out each quarter for some extra income.

High-yield dividend funds specifically are designed to pay higher dividends compared to other stocks and ETFs. If you’re looking to grow a stable stream of passive income, the Vanguard High Dividend Yield ETF can help you get there.

It’s unclear where the stock market may be headed throughout the rest of 2025. But during periods of uncertainty, investing in a dividend ETF can help keep your portfolio more protected, regardless of what’s coming.