The Best Vanguard ETF to Invest $1,000 in Right Now

The financial services sector broadly, and the asset management industry specifically, are certainly major parts of the economy. Yet even in that space, some players stand out. For instance, Vanguard, which has been around for 50 years, is a huge entity that has more than $10 trillion in assets under management.

The investment firm's founder, Jack Bogle, pioneered passive investing, an innovation that has helped average retail investors immensely. Today, Vanguard has 441 different investment vehicles. But there's one that I believe is the best exchange-traded fund (ETF) to put $1,000 in right now.

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Follow the S&P 500

The S&P 500 (SNPINDEX: ^GSPC) index is the benchmark that most investors look at to gauge the performance of the overall stock market. It consists of 500 of the largest U.S. businesses, ranging from multinational tech titans with trillion-dollar-plus market caps to comparatively small (but still multibillion-dollar) companies. All sectors are represented, and the stocks in it make up about 80% of the total U.S. equity market, so the index offers investors a broad view of how the American economy is faring.

By buying the Vanguard S&P 500 ETF (NYSEMKT: VOO), investors access a fund that mimics the performance of the S&P 500 -- because it holds shares of all the companies in it. Over the past decade, this ETF has put together a total return of 248%, so a $1,000 investment made in late June 2015 would be worth $3,480 today. On an annualized basis, this translates to a strong 13.2% annualized gain.

Starting with a $1,000 allocation is a smart way to begin your investing journey. However, there are ways to seriously boost your returns over time. Adding even small but consistent sums of money to your portfolio regularly -- whether that means monthly, weekly, biweekly, or quarterly -- can add up. This strategy, known as dollar-cost averaging, helps investors build a valuable habit of consistent investing, while also letting them take advantage of multiple price points.

The market could be up, down, or moving sideways at any given moment. With a dollar-cost averaging approach, it really wouldn't matter -- you'd still add your regular amount to your investments.

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Cheap and easy

One of the main issues with the asset management industry is that professionals -- active fund managers who manage lots of capital on behalf of clients -- generally perform poorly over time compared to the benchmark of the S&P 500. To make matters worse, those experts charge relatively high fees to those who invest in their funds. For these reasons, average folks would be better off buying a passive, index-tracking fund like the Vanguard S&P 500 ETF.

This fund shines bright on the cost front. With an expense ratio of 0.03%, Vanguard would take just $0.30 in annual fees for every $1,000 you have in the ETF. That's a no-brainer proposition.

Another thing to think about -- and it's something that I personally view as a major advantage -- is how much of your time buying the Vanguard S&P 500 ETF frees up. The stock market is arguably the best tool that most people can use to build their wealth over the long term. However, making informed choices about individual stocks requires many hours of research and ongoing attention. By contrast, putting money to work in this ETF is almost effortless. If you're bullish on the market over the very long term, you can simply add money to the fund at intervals and otherwise leave it alone. The need to spend time conducting your own research on individual companies or analyzing macroeconomic data is greatly reduced.

Looking out into the future

Historically, the S&P 500 has generated an average annualized return of about 10%. In the past decade, its returns have been even better. As we look to the next decade and beyond, I believe it's reasonable to expect it to revert back to averaging 10% gains, which would still be a great outcome.

Pessimistic investors may assert that the market's steep valuation today will be a headwind that makes it harder to generate strong returns going forward. While I understand this argument, it's also worth pointing out that stocks have continued to do well even as the benchmark federal funds interest rate sits at a 17-year high.

There are powerful forces at work, like passive investing capital flows, the rise of dominant tech companies that command premium valuations, and ongoing fiscal and monetary stimulus, that could combine to push the Vanguard S&P 500 ETF significantly higher in the future.

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

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Neil Patel has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.