David Jagielski, CPA, The Motley Fool
4 min read
Investing in the stock market doesn’t have to be complicated and require a lot of work. A set-it-and-forget-it strategy can work incredibly well. And in many cases, simply leaving investments alone can be the best thing investors can do — let them rise in value over the long haul without obsessing over how they do in the short term.
A high-quality exchange-traded fund (ETF) that provides exposure to a stable sector of the economy and that offers a high yield can be an excellent investment to hold forever. A terrific option to consider is the Vanguard Utilities ETF (NYSEMKT:VPU), which I think is suitable for any and all portfolios. Here’s why this can be an ETF that investors can buy and forget about.
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Focusing on utilities can limit exposure to market volatility
The stock market can be volatile and depend heavily on the outlook for the economy. When times are tough and inflation is rising, stocks can fall significantly in value if there isn’t much growth expected ahead.
Utility stocks, however, can make for more dependable, low-risk investments to hang on to. Back in 2022, when the markets crashed due to rising inflation, the S&P 500 declined by more than 18%, and that’s with including dividends. The Vanguard Utilities ETF, however, generated a positive return of a little over 1% when including its payout. Although it’s not a high return, it’s a great example of the resiliency that utility stocks possess, since their underlying businesses provide customers with essential services that are in demand regardless of economic cycles. They can thus be in better positions to handle economic headwinds.
The Vanguard fund currently yields just over 3%, which is also far higher than the S&P 500 average of only 1%, making it an attractive option for dividend investors.
The Vanguard Utilities ETF can be an ideal option for risk-averse investors
For investors who don’t want to worry about tracking the markets or who simply want to minimize the chance of incurring a significant loss, the Vanguard Utilities ETF can be an attractive investment to own. Investors will sacrifice some gains along the way, but investing in the fund can still yield strong long-run returns. Over the past decade, it has generated total returns (including dividends of 131%). By comparison, the S&P 500 has soared by about 320%.
