The stock market has been hot in the past few years due to the robust demand growth in artificial intelligence (AI). From chatbots to agentic AI, there’s been a flurry of new products and services that has made investors bullish on companies involved with new technologies.
The problem is that in the process, valuations for many stocks have ballooned to seemingly unsustainable levels. Many investors are unsure whether this is the start of a huge revolution, or if it’s really just the latest bubble in tech. After all, many AI investments aren’t paying off for companies, and a pullback in spending could be inevitable.
As a result, picking individual stocks is becoming increasingly challenging. If you’re worried about a bubble and don’t know what to invest in, there are some exchange-traded funds (ETFs) that could be good options to hang on to for the long haul.
Although they aren’t entirely risk-free investments, the Vanguard Dividend Appreciation Index Fund ETF (NYSEMKT: VIG) and Vanguard Growth Index Fund ETF (NYSEMKT: VUG) are solid funds with low fees that pay dividends, and which can diversify your portfolio. Here’s a closer look at why these ETFs can make for great investments today.
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The Vanguard Dividend Appreciation Index Fund has a low expense ratio of 0.05%, making it a suitable option for long-term investors as fees are minimal in this fund. On a $10,000 investment, you’re paying just $5 in fees per year. Meanwhile, you’re getting an above-average yield of 1.6% in the process, which is higher than the S&P 500 average of 1.2%.
There are over 330 holdings in this ETF, with the focus being on stocks with track records for growing their dividend payments on an annual basis. For investors, those are solid stocks to invest in, because in order for them to grow their payouts, their financials need to be strong enough to support the dividend growth. While it isn’t always the case, that can mean a safer mix of stocks.
The three largest holdings in the ETF are tech stocks: Broadcom, Microsoft, and Apple. Their strong financials enable them to grow their dividends consistently. While none of these stocks yield even 1%, over time, these might become among the best dividend stocks to own, simply because of their robust financials and sheer growth.
However, tech stocks account for 29% of the fund’s overall portfolio. There’s some good diversification here, with financials representing 22% of the portfolio, followed by healthcare at 16%, and industrials at 11%. This year, the ETF has risen by 11%, as it continues to be an excellent investment.
Another top Vanguard fund to consider for long-term safety is the Vanguard Growth Index Fund. It has an even smaller expense ratio of 0.04%. It isn’t as much of a dividend play, as it yields 0.4%, but the dividend income can nonetheless more than offset the ETF’s fees.
This fund gives investors exposure to the largest growth stocks in the U.S. It contains 160 holdings, and the overwhelming majority of them (more than 63%) are in the tech sector. There’s much more exposure to tech with this fund. But 18% of its stocks are in the consumer discretionary sector, and another 8% are in industrials. This is still a relatively safe way to invest in the long haul, given the mix of top growth stocks you’ll get exposure to, from multiple sectors.
Chipmaker Nvidia is the ETF’s top holding, followed by Apple and Microsoft. You’ll get the biggest names in tech in this fund. You’ll also get top companies from other sectors, including Eli Lilly, a leading drugmaker which was recently the first healthcare stock to hit a $1 trillion valuation.
This year, this Vanguard fund has climbed 16% in value as it has outperformed the S&P 500, which is up around 14%. The fund may suffer a decline if there is a correction or crash in the markets, but with a collection of top growth stocks in its portfolio, it’s likely to recover in the long run. This can be another solid investment to put money into for the long term.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, Vanguard Dividend Appreciation ETF, and Vanguard Index Funds-Vanguard Growth 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.
Worried About the Stock Market? Invest in These 2 Vanguard ETFs for Long-Term Growth and Safety was originally published by The Motley Fool
