Did you miss the bull market comeback? 4 ETFs You Can Buy Today

Wall Street has been in a bull market for some time. The bull run stretches until October 23, 2023, when S&P 500 the market index ended the day at a low of 4,117 points. Economists have announced the emergence of an official bull market after a 20% rise that ended on February 2, 2024.

The bull has been stretching its proverbial legs ever since. The S&P 500 is now up 32% since the start of this rally. Other market tracking tools such as Nasdaq Composite and Russell 3000indices posted similar gains, with the venerable Dow Jones Industrial Average trailing a still impressive 23% gain:

^ SPX data by YCharts.

You might feel like you’ve missed the bus. The bull market recovery has already gone too far — the growth must be exhausted by now. Instead, it must be time to build up cash savings in hopes of avoiding the next bear market and putting that money to work near the next low.

Well, I have some good news and some bad news. Let’s start with the unpleasant part.

Market timing rarely works

I’m afraid you’ll miss the next final low as well.

Market timing is notoriously difficult. Master investors like Warren Buffett don’t even try. “We don’t have the faintest idea what the stock market is going to do when it opens on Monday,” he told a shareholder meeting in 2022. “We haven’t been good at timing.”

For example, the S&P 500 experienced several sharp price declines followed by rapid gains just prior to the current major market breakout. I count about seven of these patterns in September and October 2023. Any one of them could have become the official low point, making a perfect starting point for opportunistic investors. But the downtrend continued, and none of these false starts ended up winning bull market honors.

The power of long-term investing

On the other hand, you don’t have to nail every market swing with pinpoint accuracy.

Buffett admits he can’t do it and still made his own Berkshire Hathaway a giant worth nearly a trillion dollars through decades of imperfect but also smart and patient investing.

Warren Buffett is the 93-year-old poster boy for building wealth with long-term investing. His preferred holding period is “forever,” unlocking the mathematical magic of compounded returns over many years or even decades.

Let’s say you invest $1,000 in an S&P 500 tracker such as SPDR S&P 500 ETF Trust (SPY 0.22%)an exchange-traded fund (ETF). It has delivered a compound average growth rate (CAGR) of 10.5% over its 30-year history, looking at total returns with dividends reinvested along the way. Gains have been faster in recent years, but let’s stick with the long-term averages in this example.

While 10.5% might not sound like much, those fresh returns on top of past returns really add up. Hold those shares for 10 years and you’ll have $2,714 in your pocket. It will be $7,366 after another decade and $19,993 after a 30-year holding period. Just the last year of that three-decade span will put $1,900 in your wallet — a 10.5% increase worth nearly double the original investment in a single year.

Now imagine doing that while adding more money to your investment over the years, perhaps starting with a larger stake. This is how you build lasting wealth in the stock market — time, patience and consistent investing.

Perfect market timing has no place in this winning strategy. You just don’t need it.

ETFs to Consider for Your Portfolio

Broad market trackers such as the previously mentioned SPDR fund or Vanguard S&P 500 ETF (VOO 0.21%) they are perfect starting points for any investor. They combine broad diversification with obliviously low annual fees, and their index-defined focus on the 500 largest US stocks adds stability to the portfolio.

But I understand if you’d prefer to increase a somewhat smaller basket of promising growth stocks. Popular examples include Vanguard Growth ETF (VUG 0.22%) fund, which focuses on large-cap stocks with fast growth in earnings and income. Or you could go with Vanguard Information Technology ETF (VGT 0.23%)which doubles to about 300 stocks in the technology sector.

These high-quality, low-fee funds tend to outperform the S&P 500 over the long term. Here’s how a $1,000 investment in the three Vanguard funds I just mentioned would have performed over the past decade:

VGT Total Return Level data by YCharts.

Small differences in average returns can make a big difference to your earnings. The annual growth rates of these funds range from 12.8% to 20.2%. Growth rates will vary over time and we cannot guarantee that funds focused on technology stocks and growth stories will always outperform the broader market. Still, I like my chances of beating the S&P 500 with a proven performer like the Vanguard Information Technology ETF. I highly recommend it if you agree that tech experts should outperform the market as a whole over the long term.

So, don’t worry about missing the highest peaks and deepest valleys of this bull market. You can safely start investing in any of the four ETFs mentioned above — or a combination of them — and patiently hold them for many years. There will be good years and bad years, peppered with the occasional crash or boom.

And on average, you’ll see your wealth grow over time. That’s how Buffett does it, and his buy-and-hold strategy works wonders for us mere mortals, too.