Investing

3 Vanguard ETFs to Buy in 2025

Chris MacDonald

Published: January 3, 2025 9:35 am

As investors look ahead to 2025, rebalancing and re-thinking one’s investing priorities and strategies can be helpful. Many of us may set New Year’s resolutions, and many may have set some goals tied to personal finance (improve one’s savings rate, or pay down debt). But how one chooses to allocate funds in a retirement account or brokerage account, for example, may be something that’s not necessarily on everyone’s radar. 

Going one step further, deciding once and for all whether an individual investor wants to be active with researching and picking individual stocks, or more passive and simply own funds that reflect the broader market or some sector of the economy.

As I’ve mentioned before, I think certain ETFs can play a role in both active and passive portfolios. The three options I’m going to lay out here are offered by Vanguard, a firm that’s well-known for providing some of the most cost-effective and diverse exchange-traded funds (ETFs) out there.

In my view, these are three of the top Vanguard ETFs I think investors ought to consider to kick off the new year.

Key Points About This Article:

• These three Vanguard ETFs provide low-cost diversification which is really unmatched.
• Here’s why these particular exchange-traded funds should be on investors’ watch lists right now.
• Retiring early is possible, and may be easier than you think. Click here now to see if you’re ahead, or behind. ^(Sponsor)

Vanguard S&P 500 ETF (VOO)

The Vanguard S&P 500 ETF (VOO) remains a staple for investors aiming to mirror the performance of the S&P 500. As far as pure index funds are concerned, VOO is about as close of a proxy as any investor can get to owning the S&P 500. In other words, when one goes to any website that shows the performance of the S&P 500 on a given day, that’s how much your particular holding will have increased or decreased. This simplifies the investing process and makes for many a much easier-to-follow investing experience. 

What’s incredible about this particular ETF is that investors can gain access to the largest and most successful 500 companies in the U.S. for an exceptionally low expense ratio of just 0.03%. That’s an inordinate amount of diversification for essentially free. 

Of course, expectations for where the S&P 500 will head over the course of the next year vary widely. Many Wall Street analysts predict a more subdued performance for the Vanguard S&P 500 ETF (VOO) in 2025 following two years of significant gains. There’s a reason why many talking heads are pushing the idea that there’s likely going to be muted returns moving forward. Three consecutive years of 20%+ returns isn’t really a thing, so we may indeed see more downside volatility this year, if probabilities play out as expected.

That said, over the long-term, the S&P 500 has been an excellent investing vehicle. I don’t think that’s going to change a decade or two down the road.

Vanguard Total Stock Market ETF (VTI)

For those seeking comprehensive exposure across all market caps, the Vanguard Total Stock Market ETF (VTI) is an excellent choice. Indeed, as far as passive investment options that provide the broadest possible diversification, this is my top pick. Like VOO, this particular ETF provides this incredible diversification (to more than 4,000 U.S. stocks) at a 0.03% expense ratio. I have no idea how firms like Vanguard can do this, but that magical ultra-low-cost diversification only benefits long-term investors very long time horizons. 

The VTI ETF tracks the CRSP U.S. Total Market Index, which includes more than 4,000 U.S. stocks ranging from small to large caps across various sectors. So, this fund is an all-encompassing investment solution for those who don’t want to be too heavily weighted toward mega-cap growth stocks (as most major indices are today).

Indeed, investing in a fund like VTI may be better-positioned to weather economic storms as they arise. And while it’s certainly possible that we could see some storm clouds build this year (as many experts predict), I do think this extra bit of diversification is worth considering. That’s why I hold this particular ETF as my primary holding in my retirement account.

Vanguard S&P 500 Growth ETF (VOOG)

For investors who want to have the sort of broad exposure the first two ETFs provide, but with a much stronger tilt toward growth stocks, there’s the Vanguard S&P 500 Growth ETF (VOOG). This particular Vanguard ETF does have a slightly higher expense ratio of 0.10%, but the construction of this particular ETF is intriguing and does have some semi-active components to how this fund picks and chooses stocks. 

This ETF essentially targets the most innovative and highest-growth stocks within the S&P 500, and rebalances its holdings based on performance. In 2024, VOOG achieved a remarkable return of approximately 38%, outpacing the S&P 500’s gain of around 29%. Thus, for those who believe that growth stocks will continue to lead the way higher, this would be the option to buy and hold. 

While many investors believe that VOOG looks poised for continued strong performance in 2025, building on its impressive gains in 2024, I think there’s reason to be cautious here. I don’t mind this particular ETF as a core holding or a piece of a more diversified portfolio. But given how far and how fast growth stocks have surged in recent years, this is one particular fund I think could be poised for big downside if some sort of shock materializes. 

We’ll see, to each their own. These three ETFs meet a range of different investing criteria for those with different goals – and that’s what makes these three funds worth considering in my view.