A Bull Market Is Coming: 2 Solid Index Funds That Are Proven Moneymakers to Buy Now and Hold

Index funds are generally seen as boring alternatives to individual stocks, but investors should take care not to conflate boring investments with bad investments. A diversified index fund that tracks the right benchmark can simultaneously eliminate concentration risk and create substantial wealth for patient investors.

Building on that idea, the Vanguard Total Stock Market ETF (NYSEMKT:VTI) and Vanguard Mega Cap Growth ETF (NYSEMKT:MGK) are proven moneymakers, and with the S&P 500 (SNPINDEX:$SPX) on the brink of a new bull market, now is a particularly good time to buy both index funds.

Here are the important details.

Why invest in the Vanguard Total Stock Market ETF?

The Vanguard Total Stock Market ETF tracks more than 3,800 large U.S. companies comprising a blend of value stocks and growth stocks from all 11 market sectors. The index fund spreads capital across the entire U.S. stock market, meaning shareholders are effectively hitching their wagons to the American economy. That makes for a compelling investment thesis.

Indeed, JPMorgan Chase CEO Jamie Dimon recently described America as the largest, most prosperous, and most innovative economy on the planet, and Warren Buffett once quipped that "America's golden goose of commerce and innovation will continue to lay more and larger eggs." Both comments imply that diversified exposure to U.S. equities should be lucrative over long periods.

The 10 largest holdings in the Vanguard Total Stock Market ETF are ranked below by weighted exposure:

1. Apple: 6.7%
2. Microsoft: 5.8%
3. Alphabet: 3%
4. Amazon: 2.6%
5. Nvidia: 2.3%
6. Tesla: 1.6%
7. Meta Platforms: 1.5%
8. Berkshire Hathaway: 1.4%
9. UnitedHealth Group: 1%
10. ExxonMobil: 1%

The Vanguard Total Stock Market ETF returned 205% over the last decade, equivalent to 11.78% annually. At that pace, $150 invested weekly would be worth $143,400 in one decade and $580,100 in two decades.

Here's the bottom line: The Vanguard Total Stock Market ETF is a good option for any investor, either in addition to or in lieu of individual stocks. But the diverse nature of the index fund makes it a particularly attractive option for risk-averse investors who want stock exposure. The U.S. economy has consistently expanded over time, and assuming that pattern persists, this index fund should continue to make money.

Why invest in the Vanguard Mega Cap Growth ETF?

The Vanguard Mega Cap Growth ETF tracks about 90 large U.S. companies from 10 of the 11 stock market sectors. But more than three-quarters of its assets are parked in the information technology and consumer discretionary sectors, both of which tend to outperform during bull markets. The index fund spreads capital across many of the most influential growth stocks in the world, including the Magnificent Seven.

The 10 largest holdings in the Vanguard Mega Cap Growth ETF are ranked below by weighted exposure:

1. Apple: 16.2%
2. Microsoft: 14.1%
3. Alphabet: 7.3%
4. Amazon: 6.3%
5. Nvidia: 5.1%
6. Tesla: 3.9%
7. Meta Platforms: 3.4%
8. Eli Lilly: 2.2%
9. Visa: 2.2%
10. Mastercard: 1.9%

As detailed above, the Vanguard Mega Cap Growth ETF is far more concentrated than the Vanguard Total Stock Market ETF. It tracks fewer companies and leans very heavily on just two market sectors. As a result, the Vanguard Mega Cap Growth ETF has historically been more volatile but has also delivered superior returns.

The growth-focused index fund soared 310% over the last decade, or 15.14% annually. At that pace, $150 invested weekly would be worth $171,400 in one decade and $873,600 million in two decades.

Here's the bottom line: The Vanguard Mega Cap Growth ETF is undoubtedly the riskier of the two index funds discussed. However, its track record over the last decade makes it a compelling option for risk-tolerant investors particularly bullish on technology stocks.

The next bull market is right around the corner

In my opinion, there is never a bad time to buy the index funds discussed in this article, but right now is a particularly good time to pick up a few shares. The S&P 500 is just 7% from a record high -- the point at which a new bull market definitively begins -- and the index has returned an average of 186% during the last nine bull markets, according to Hartford Funds.

So what? The S&P 500 is a benchmark for the U.S. stock market. It covers about 80% of all publicly traded U.S. stocks in terms of market capitalization, and both index funds discussed in this article are comprised entirely of U.S. stocks. In other words, if the S&P 500 is going up, the Vanguard Total Stock Market ETF and the Vanguard Mega Cap Growth ETF are probably going up, too.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Trevor Jennewine has positions in Amazon.com, Mastercard, Nvidia, Tesla, and Visa. The Motley Fool has positions in and recommends Alphabet, Amazon.com, Apple, Berkshire Hathaway, JPMorgan Chase, Mastercard, Meta Platforms, Microsoft, Nvidia, Tesla, Vanguard Index Funds-Vanguard Total Stock Market ETF, and Visa. The Motley Fool recommends UnitedHealth Group and recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.