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The S&P 500 (SNPINDEX: ^GSPC) represents 500 companies (with 503 stocks) and it includes stocks from all 11 sectors of the U.S. economy, giving it some relative diversity. Stocks from the technology sector make up about 30% of its weighting, giving investors plenty of exposure to some fast-growing stocks, including those with ties to artificial intelligence (AI).

The S&P 500 hit a new record high in January 2024, confirming a bull market that began when the index bottomed in late 2022 was underway. Since then it has continued to march higher, with a gain of almost 18% so far in 2024.

Even with all those gains, it's not too late to buy as the odds favor some level of growth in any given year for the S&P 500. Since 1919, the index has been positive on an annual basis roughly three out of every four years of its existence. That suggests those who can invest in the market overall have a good chance of making money. Exchange-traded funds (ETFs) offer a simple way to capture those gains, and even outperform them in some cases.

Vanguard issues some of the most affordable ETFs in the world. Here's why investors with $900 in cash available to invest might want to use it to take advantage of this latest bull market and buy one share of the Vanguard S&P 500 ETF (NYSEMKT: VOO) and one share of the Vanguard S&P 500 Growth ETF (NYSEMKT: VOOG).

1. Vanguard S&P 500 ETF

The Vanguard S&P 500 ETF has a very simple objective: Track the performance of the S&P 500 index by holding the same stocks and maintaining identical sector weightings. It's incredibly cheap for investors to own, with an expense ratio of just 0.03% (the portion of the fund deducted each year to cover management costs).

In dollar terms, that means a $10,000 investment in the ETF would incur an annual fee of just $3. Vanguard says comparable funds offered by competitors are a whopping 26 times more expensive, with an average expense ratio of 0.78%, which can negatively impact returns over the long term.

As I touched on earlier, technology is the largest of the 11 sectors in the S&P 500, with a weighting of 30.6%. In fact, the top five stocks in the index (and the Vanguard ETF) operate in the technology industry:

Data source: Vanguard. Portfolio weightings are accurate as of May 31, 2024, and are subject to change.

All five of those companies have entered the AI race. Microsoft agreed to invest $10 billion in ChatGPT creator OpenAI last year, and it used the start-up's technology to create its own virtual assistant called Copilot. Apple also partnered with OpenAI to develop its Apple Intelligence software, which will launch later this year alongside the iOS 18 operating system.

Nvidia designs the semiconductors that make AI development possible. Its graphics processing units (GPUs) for the data center are the hottest product in Silicon Valley, with tech giants and start-ups alike buying as much supply as they can get their hands on.

Outside of technology, the financial sector is the second largest in the S&P 500, with a 12.8% weighting. It includes investment banks like JPMorgan Chase and consumer banks like Bank of America. Healthcare comes next with a 12% weighting, followed by the consumer discretionary sector at 9.8%.

The Vanguard ETF has delivered a compound annual return of 14.5% since its inception in 2010 (in line with the S&P 500). However, that exceeds the index's long-term average annual return of 10.4% dating back to 1957, primarily due to the rise of high-growth technology stocks over the past decade.

The above-average returns could continue for the foreseeable future on the back of technologies like AI, but investors should expect gains to normalize back to 10% per year over the long term.

2. Vanguard S&P 500 Growth ETF

Investors willing to accept a little more risk for the opportunity to earn higher returns might want to consider the Vanguard S&P 500 Growth ETF. Its objective is to mimic the S&P 500 Growth index, which only holds the best-performing stocks in the S&P 500 and excludes the rest. Those stocks are selected based on factors like momentum and the sales growth of the underlying companies.

The ETF currently holds 229 stocks from the same 11 sectors as the S&P 500, but the weightings are very different. For example, technology represents a whopping 48.6% of the S&P 500 Growth index because that's where most of the momentum and revenue growth is coming from at the moment.

As a result, the ETF has the same top five holdings as the S&P 500, except they each have a much larger weighting:

Data source: Vanguard. Portfolio weightings are accurate as of May 31, 2024, and are subject to change.

The Vanguard S&P 500 Growth ETF has an expense ratio of 0.1%. While that's slightly higher than the S&P 500 ETF, it's still much lower than the industry average for equivalent funds, which is 0.95% (according to Vanguard).

Plus, the fund has delivered a compound annual return of 16.2% since it was established in 2010. Although that is only 1.7 percentage points higher per year compared to the regular S&P 500 ETF, the effects are significant in dollar terms thanks to the magic of compounding:

Calculations by author.

The S&P 500 Growth ETF is rebalanced once per quarter, meaning the worst-performing stocks are removed and replaced by the best performers from the S&P 500. Therefore, the fund should always outperform the S&P 500 over the long term (in theory).

However, the fund is susceptible to larger losses in the short term because of its heavy exposure to the technology sector. If AI fails to live up to the hype, for example, stocks like Microsoft and Nvidia could suffer steep declines. That could send the ETF plummeting more severely than the S&P 500, at least until the next rebalancing rolls around.

Investors should always keep that risk in mind. But as long as tech continues to drive the market, the Vanguard S&P 500 Growth ETF should deliver great long-term returns.

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

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Bank of America is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, Bank of America, JPMorgan Chase, Meta Platforms, Microsoft, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool 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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.