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Want Passive Income From the Stock Market? 3 Magnificent Vanguard ETFs to Buy and Hold Forever | The Motley Fool

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  Published in Stocks and Investing on Saturday, November 8th 2025 at 16:27 GMT by The Motley Fool
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Passive Income from the Stock Market: How Vanguard ETFs Make Buying & Holding Simple

For many investors the idea of earning steady income from the stock market can feel intimidating—especially when the world of equities is riddled with jargon, high‑fee mutual funds, and market volatility. The Motley Fool’s recent piece, “Passive Income: The Stock Market, Vanguard ETFs, Buy & Hold,” distills the concept into a clear, actionable strategy. At its core, the article argues that owning a handful of low‑cost Vanguard ETFs, then letting those holdings sit for the long haul, is a reliable way to generate passive income, largely through dividends.

Why Vanguard? Low Costs, High Reliability

The article opens by explaining why Vanguard is the preferred family of ETFs for passive investors. Vanguard’s “index‑fund” philosophy ensures that each ETF tracks a broad market index with minimal deviation. That, combined with a historic focus on low expense ratios, means investors keep more of the return. The piece cites Vanguard’s expense ratios for three core ETFs—Vanguard Total Stock Market ETF (VTI), Vanguard S&P 500 ETF (VOO), and Vanguard Dividend Appreciation ETF (VIG)—all hovering around 0.03–0.05% annually. For comparison, many actively managed funds charge five times that or more.

The author links directly to Vanguard’s own ETF pages:

• Vanguard Total Stock Market ETF (VTI) – https://investor.vanguard.com/etf/profile/VTI
• Vanguard S&P 500 ETF (VOO) – https://investor.vanguard.com/etf/profile/VOO
• Vanguard Dividend Appreciation ETF (VIG) – https://investor.vanguard.com/etf/profile/VIG

These pages provide the latest expense ratios, dividend yields, and fund holdings.

The Buy‑and‑Hold Method Explained

A central theme of the article is the simplicity of the buy‑and‑hold method. Rather than attempting to time the market, the strategy involves purchasing shares of the selected ETFs and leaving them untouched for years—ideally decades. Over that period, dividends are paid out monthly or quarterly, and the principal grows with the overall market.

The author walks readers through a hypothetical portfolio allocation:

1. 60% in VTI – gives exposure to the entire U.S. equity market, from small to large caps.
2. 20% in VOO – focuses on the 500 largest U.S. companies, a proven “core” of long‑term growth.
3. 20% in VIG – targets companies with a history of steadily increasing dividends, boosting the income stream.

When the portfolio is rebalanced annually, the same allocation is restored, ensuring that the asset mix remains aligned with the investor’s goals. The article emphasizes that rebalancing keeps risk in check, especially when certain sectors outperform others.

Dividend Income: The “Passive” Component

The piece dives into how dividends become the primary source of passive income. Vanguard ETFs typically offer dividend yields in the 1.5–2.5% range, which, when reinvested, contribute to the overall return. The article includes a simple calculation: a $100,000 investment in VTI with a 1.8% dividend yield yields $1,800 annually before taxes. If the dividends are reinvested, the future value grows faster thanks to the power of compounding.

A sidebar quotes a long‑term study: “Dividend‑paying stocks have historically accounted for about 30% of total equity returns.” The Motley Fool article cites data from Vanguard’s “Annual Investor Report” and independent research to reinforce this point.

Tax Considerations

Another practical section addresses the tax treatment of dividends. Qualified dividends are taxed at a lower rate than ordinary income. The article explains how investing through a tax‑advantaged account (IRA, 401(k), or Roth IRA) can amplify the benefits, either by deferring taxes or allowing tax‑free growth. The author links to IRS guidelines on qualified dividends: https://www.irs.gov/credits-deductions/qualified-dividends.

Managing Risk and Avoiding Common Pitfalls

The author acknowledges that the stock market can be volatile, especially in short‑term cycles. To mitigate risk, the piece suggests diversifying across sectors and maintaining an emergency fund outside of the equity portfolio. Additionally, the article warns against over‑rebalancing—frequent trades can trigger unnecessary transaction costs and tax liabilities.

The article also dispels the myth that “dividends alone can fund a retirement.” While dividends are a valuable income stream, they should be viewed as a component of a broader financial plan that includes savings, investments, and budgeting.

Further Reading and Resources

For readers who want to dive deeper, the article lists a few supplemental resources:

• Vanguard’s “Investor Education” hub – https://investor.vanguard.com/education
• The Motley Fool’s “Dividend Investing” guide – https://www.fool.com/investing/dividend-investing/
• A free webinar on passive income strategy, hosted by Vanguard – https://investor.vanguard.com/webinars

These links provide interactive tools, calculators, and expert insights to help investors fine‑tune their portfolios.

Bottom Line

The Motley Fool’s article on passive income with Vanguard ETFs delivers a clear, evidence‑based blueprint for long‑term investors. By selecting a few low‑cost, diversified ETFs, adopting a disciplined buy‑and‑hold approach, and rebalancing annually, investors can create a reliable stream of dividend income while riding the growth of the broader market. The strategy’s simplicity and emphasis on low fees make it accessible even for those new to investing, offering a practical path to building wealth over time.