
Low-cost funds offer excellent diversification and can maintain low risk for investors.
According to a recent survey from the Employee Benefit Research Institute, Americans often retire before the age of 65, with the median retirement age being 62. This early retirement is frequently due to health issues, disabilities, and factors beyond their control, rather than financial readiness.
Ideally, individuals would retire early because their finances allow it. One strategy to strengthen financial positions for retirement is investing savings in exchange-traded funds (ETFs). Notably, the Vanguard S&P 500 ETF (VOO) and the Vanguard Total Stock Market Index Fund ETF (VTI) can assist in this endeavor.
The Vanguard S&P 500 ETF tracks the S&P 500 index, providing exposure to top market stocks like Apple and Microsoft. It has a low expense ratio of 0.03%, minimizing fee-related impacts on gains. With a median market cap exceeding $260 billion, this ETF is considered low-risk, making it suitable for long-term investors looking to regularly invest. Over the past decade, the fund has delivered total returns of approximately 250%, averaging a compounded annual growth rate of 13.4%, outperforming the S&P 500’s long-term average.
Alternatively, the Vanguard Total Stock Market Index Fund ETF offers a broader investment approach, containing over 3,600 stocks across large-, mid-, and small-cap categories. This ETF also has a 0.03% expense ratio and poses less risk due to its wide diversification. Although its returns over the past decade, at 234%, slightly trail the S&P 500 ETF, the fund’s compounded annual growth rate of 12.8% still represents robust performance. This diversity makes the fund less prone to fluctuations in specific sectors, such as tech or high-growth stocks.
Both of these ETFs are considered strong long-term investment options, potentially facilitating significant savings growth over time. Investors may want to consider allocating funds to both ETFs.