1 Reason to Buy the Vanguard 500 Index (VFIAX) Index Fund Admiral Shares

Key Points

• This mutual fund encompasses 500 of America's biggest companies.

• Investing in it plugs you into most of the U.S. economy.

• Another way to invest in it is via an exchange-traded fund (ETF).

• 10 stocks we like better than Vanguard Index Funds - Vanguard S&P 500 ETF ›

If you're looking for a promising investment, give some consideration to the Vanguard 500 Index (NASDAQMUTFUND: VFIAX) fund. It's an index fund that tracks the S&P 500 index of 500 of America's biggest companies, and that index has averaged annual gains of close to 10% over many decades.

A key reason to invest in it is for its diversification, which can reduce your portfolio's risk. Those 500 holdings together represent around 80% of the entire U.S. stock market's value. And they include all of the "Magnificent Seven" stocks, which are Apple, Amazon.com, (Google parent) Alphabet, (Facebook parent) Meta Platforms, Microsoft, Nvidia, and Tesla.

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Image source: Getty Images.

Investing in this fund is like betting on the future of the American economy. As superinvestor Warren Buffett noted back in his 2015 letter to shareholders, " For 240 years it's been a terrible mistake to bet against America, and now is no time to start. America's golden goose of commerce and innovation will continue to lay more and larger eggs."

Here are the fund's recent top holdings:

Source: Morningstar.com, as of June 30, 2025.

The top 10 holdings together made up about 37% of the whole fund -- because the S&P 500 index is market-cap weighted. That means larger companies will move the needle more than smaller companies.

You can buy into the S&P 500 in another way through Vanguard, too -- via its Vanguard S&P 500 ETF (NYSEMKT: VOO). It's an exchange-traded fund (ETF) -- a fund that trades like a stock, which can make it easier for many people to invest in it. If you invest in the mutual fund through Vanguard, you may be facing a $3,000 minimum investment requirement, but you can buy into the ETF with just a few dollars -- or hundreds of thousands.

Should you invest $1,000 in Vanguard Index Funds - Vanguard S&P 500 ETF right now?

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Selena Maranjian has positions in Alphabet, Amazon, Apple, Berkshire Hathaway, Broadcom, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Meta Platforms, Microsoft, Nvidia, Tesla, and Vanguard S&P 500 ETF. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.