1 Must-Have Index Fund to Buy Now for Under $1,000

2025-10-21 09:03:50

Source: Motley_fool

12 Sept 2025 12:49

Key Points

The Vanguard S&P 500 ETF (VOO) consistently outperforms supposedly “safer” alternatives like gold and long-term dividend funds.
Gold funds and dividend growth funds may seem good during crises but tend to lag behind the S&P 500 after just a few years.
Time in the market beats timing the market, making VOO a smart buy regardless of where Wall Street is headed.

The economy sometimes seems frightening. With heightened international tensions, unpredictable tariff movements, and record prices in the stock market, I understand if you are looking for “safe haven” investments right now. I confess that I myself am keeping some cash on the sidelines until I find a suitable low-risk idea.

But the more I search for supposedly safer options, the more I simply want to add that extra money to my positions in the Vanguard S&P 500 ETF (NYSEMKT: VOO). Even if pessimists are right and the market is on the verge of a painful correction, I still recommend this hard-to-beat favorite among long-term investors.

Image: Getty Images.

Not even Warren Buffett can predict market movements

At the heart of my recommendation for VOO is this simple truth: Time in the market almost always beats timing the market.

You would have to be some kind of genius to consistently predict the large movements of the market before they happen. The closer you want to be to the absolute peaks and valleys of each cycle, the harder it becomes. And even the great masters of investing are wrong often.

Most of us could very well flip a coin. Perhaps a storm is brewing on Wall Street, or the bull market could continue for years. I don't know for sure, and neither do you, and unexpected events could disrupt even the best predictions. The coronavirus pandemic was as predictable as the Spanish Inquisition, just like the rise of artificial intelligence.

I tried the “safer” alternatives and I wasn't impressed.

Still, I tried to find some lower risk ideas for tough days. In testing my ideas, I compared the candidate index funds against the Vanguard S&P 500 ETF. For periods prior to the launch of that ETF almost exactly 15 years ago, the underlying index S&P 500 served the same comparative purposes.

At first glance, some low-risk investments seemed promising. The classic gold tracker SPDR Gold Shares performed better than the S&P 500 during the first year of the mortgage crisis in 2008. The Vanguard Dividend Growth Fund also did.

But the magic of low risk fades over the long term. The gold fund lagged behind the S&P 500 index after six years, and the dividend growth fund offers returns very similar to the S&P 500 over time. I already know which asset I would prefer to hold today, 17 years after the crisis.

Cash under the mattress is another losing strategy

Similar trends developed with other lower-risk ETFs and different periods of financial crises. In some cases, the supposed low-volatility funds followed the downward trend of the S&P 500 or even yielded below the market index in tough times.

And what about simply sitting on that cash for a while, maybe a few years? That is another low-yield idea. Even if you start from an all-time high just before a sharp decline, the S&P 500 and its index funds will certainly gain value over a five or ten-year period. Meanwhile, the cash under your pillow continues to lose value due to inflation.

So yes, I am convincing myself to buy more shares of the Vanguard S&P 500 ETF very soon. It's a proven long-term strategy, backed by geniuses like Warren Buffett and Jack Bogle, and possibly a great investment idea in any economy, including this one. And you don't need to be rich to start. A share of this fund costs around $600 today.

Disclaimer: For informational purposes only. Past performance is not indicative of future results.

1 Must-Have Index Fund to Buy Now for Under $1,000

Key Points

Not even Warren Buffett can predict market movements

I tried the “safer” alternatives and I wasn't impressed.

Cash under the mattress is another losing strategy

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