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Three Vanguard ETFs to Build a Long-Term Portfolio with Just $500

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  Published in Stocks and Investing on Friday, December 19th 2025 at 9:08 GMT by The Motley Fool

Three Vanguard ETFs to Buy with $500 and Hold Forever – A Summary

On December 19, 2025, The Motley Fool published an article titled “3 Vanguard ETFs to Buy With $500 and Hold Forever.” The piece offers a straightforward, long‑term investing strategy that relies on a handful of low‑cost Vanguard ETFs. By allocating a modest sum—$500—to three index funds, the author argues you can build a diversified, resilient portfolio that will serve you for the rest of your life. Below is a comprehensive summary of the key ideas, ETF selections, and practical steps outlined in the article.

Why Vanguard? The Low‑Cost Advantage

The article opens by highlighting Vanguard’s reputation for keeping fees minimal. Vanguard’s ETFs typically have expense ratios below 0.05 %, making them one of the cheapest ways to gain broad market exposure. Lower fees translate directly into higher long‑term returns, especially over decades. The author stresses that the goal is “buy, hold, and let the power of compounding do its thing,” and low expenses are essential to that plan.

The Three ETFs

The strategy revolves around three Vanguard ETFs that together span the core asset classes: U.S. equities, international equities, and fixed‑income. Each fund is described in terms of its holdings, risk profile, and historical performance.

1. Vanguard Total Stock Market ETF (VTI)

• What it covers: The entire U.S. equity market—from large‑cap giants to small‑cap innovators. VTI tracks the CRSP U.S. Total Market Index.
• Expense ratio: 0.03 %. One of the lowest for a U.S. equity ETF.
• Why it matters: By including every public U.S. company, VTI delivers instant diversification within the domestic market. Historically, the U.S. market has delivered roughly 7–9 % annualized growth over the long term.
• Typical holdings: Apple, Microsoft, Amazon, and many other major names.

2. Vanguard Total International Stock ETF (VXUS)

• What it covers: The global equity market outside the United States, including both developed and emerging markets. VXUS tracks the FTSE Global All‑Cap ex‑USA Index.
• Expense ratio: 0.07 %. Still inexpensive compared with many international funds.
• Why it matters: International diversification mitigates the risk that the U.S. market alone could dominate the portfolio’s performance. Exposure to economies such as China, India, Germany, and Brazil can add growth potential and reduce correlation.
• Typical holdings: Alibaba, Samsung, Nestlé, and other non‑U.S. firms.

3. Vanguard Total Bond Market ETF (BND)

• What it covers: The U.S. investment‑grade bond market, from Treasury notes to corporate bonds. BND tracks the Bloomberg U.S. Aggregate Float‑Adjusted Index.
• Expense ratio: 0.035 %. Again, very low for a bond fund.
• Why it matters: Bonds provide income and act as a stabilizer during equity downturns. Over the past few decades, bonds have offered modest returns (2–4 %) with lower volatility than stocks.
• Typical holdings: U.S. Treasuries, municipal bonds, and high‑quality corporate debt.

How to Allocate the $500

The article suggests a simple allocation that balances growth potential and risk. While exact percentages can be tweaked, the recommended split is:

The author notes that a 40/30/30 split is “comfortably balanced” for most investors, especially those in the early stages of retirement or with a medium‑to‑long‑term horizon. If you prefer a more aggressive stance, you could increase the equity portion; if you’re risk‑averse, you could bump up the bond allocation.

Practical Steps to Buy

1. Open a brokerage account – Vanguard itself, Fidelity, Charles Schwab, or any broker that offers zero‑commission trading on Vanguard ETFs will work.
2. Fund the account – Transfer the $500 from your bank. The article recommends setting up a one‑time transfer to avoid the temptation of multiple smaller purchases.
3. Place the trades – Buy the shares of VTI, VXUS, and BND in the proportions above. Vanguard’s platform allows “market‑price” orders that fill instantly; other brokers offer “limit” orders if you’re price‑sensitive.
4. Rebalance annually – Over time, the values of the ETFs will drift. A simple rule is to return each holding to its target percentage every year. Most investors will find that rebalancing a few times a year is enough.

The Long‑Term Rationale

The article frames the strategy as “buy now, hold forever.” Two key concepts justify this stance:

1. Compounding – The longer you stay invested, the more compound interest works for you. Even a modest 5 % return can double an investment every 14–15 years.
2. Market Timing Risk – Trying to time the market is notoriously difficult and often leads to missed gains. A passive, diversified portfolio eliminates the need for market predictions.

The author backs the plan with data: a 40/30/30 split has historically outperformed 60/40 (stocks/bonds) in the U.S. by capturing upside from international markets while keeping volatility in check.

Additional Resources

The article includes hyperlinks to the official Vanguard pages for each ETF. These pages offer in‑depth fact sheets, performance charts, and holdings lists, which are valuable for investors who want to dig deeper. The author also links to Vanguard’s “Low‑Cost Investing” guide, which explains how fees affect returns over 10, 20, and 30‑year horizons.

Take‑away

• Three ETFs, low cost, diversified: VTI (U.S. equities), VXUS (international equities), BND (bonds).
• Simple allocation: 40 % VTI, 30 % VXUS, 30 % BND.
• Buy once, hold, and rebalance annually.
• Focus on compounding, not timing.

With just $500, this strategy provides a practical, evidence‑based framework for long‑term investing. By choosing Vanguard’s low‑expense ETFs and sticking to a disciplined approach, investors can navigate market cycles and let the markets work for them over the rest of their lives.