The Best Vanguard ETF for Your Next $1,000 Investment

The tech sector and the artificial intelligence (AI) trade continue to push U.S. stock prices to record highs.

The S&P 500 is on pace for its fourth consecutive year of double-digit gains. AI-fueled earnings growth has been strong over the past year. What's not to like?

Actually, there are a few things. Inflation is back above 4% thanks to surging oil prices and the war in Iran. Consumer spending fatigue and sentiment have gotten worse.

Gross domestic product growth is slowing. There are legitimate reasons to think that there's some real underappreciated market risk looming. Will AI create the world's first trillionaire?

Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue » That's why I think the next fund to own now is not the Vanguard S&P 500 ETF (NYSEMKT: VOO) or the Vanguard Information Technology ETF (NYSEMKT: VGT). It's the more defensive, income-focused Vanguard Dividend Appreciation ETF (NYSEMKT: VIG).

Image source: Getty Images. Why VIG has the right portfolio construction This exchange-traded fund tracks the S&P U.S.

Dividend Growers index, which screens for stocks that have raised their annual dividends for at least 10 consecutive years. It doesn't have any requirements for balance sheet health or yield. But companies that are consistently paying dividends and have committed to growing them for years are usually in a good financial position.

The one thing I find interesting about the Vanguard Dividend Appreciation ETF is that it's weighted by market capitalization instead of by any dividend-related measure. That means the biggest companies get the biggest weights, regardless of their yield or how long they've been making dividend payments. That's how you get Broadcom, Apple, and Microsoft as the top three holdings.

It also helps explain why the fund as a whole only has a dividend yield of 1.5%. But that actually produces a unique portfolio with elements of both income and growth.

The regularly increasing dividend payments help offset some of the effects of inflation, while the tech-heavier allocation (25% of assets are currently invested in tech stocks) ensures exposure to any further AI-fueled rallies. Why VIG is an ETF to buy now With tech earnings growth looking solid for the remainder of this year and 2027, there's every reason to believe that this sector could continue leading and pushing the market higher. Any dividend ETF that overweights tech relative to its peers is able to tilt more conservative, but not too conservative.

That could prove the place to be, given that valuations are still a concern. Story Continues With the Fed looking like it could hike before the end of the year, duration-sensitive equities might be under some pressure. This fund's double-digit allocation to both healthcare and consumer staples is likely to provide support if rates keep moving higher.

The Vanguard Dividend Appreciation ETF may not be a huge income generator, but its balanced portfolio allocation could be the sweet spot for the rest of this year. Should you buy stock in Vanguard Dividend Appreciation ETF right now? Before you buy stock in Vanguard Dividend Appreciation ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now…

and Vanguard Dividend Appreciation ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004...

if you invested $1,000 at the time of our recommendation, you’d have $433,268!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,259,391!

* Now, it’s worth noting Stock Advisor’s total average return is 935% — a market-crushing outperformance compared to 207% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of June 15, 2026.

David Dierking has positions in Apple and Vanguard Dividend Appreciation ETF. The Motley Fool has positions in and recommends Apple, Broadcom, Microsoft, Vanguard Dividend Appreciation ETF, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.

The Best Vanguard ETF for Your Next $1,000 Investment was originally published by The Motley Fool The tech sector and the artificial intelligence (AI) trade continue to push U.S. stock prices to record highs.

The S&P 500 is on pace for its fourth consecutive year of double-digit gains. AI-fueled earnings growth has been strong over the past year. What's not to like?

Actually, there are a few things. Inflation is back above 4% thanks to surging oil prices and the war in Iran. Consumer spending fatigue and sentiment have gotten worse.

Gross domestic product growth is slowing