What's the Best Way to Invest in Stocks Without Any Experience? Try This Index Fund ETF.

For people just looking to start out investing, the stock market can be complicated. That's why it is often a good idea for new investors to begin their stock-trading journey by buying exchange-traded funds (ETFs) based on popular market indexes. One of the best ETFs to start investing in is the Vanguard S&P 500 ETF (NYSEMKT: VOO) , which is based on the popular S&P 500 index.

Let's examine why this can be a great first investment for those without much investing experience.

This ETF is a great investment option

The S&P 500 has long been considered the benchmark of the U.S. stock market, as it tracks 500 of the largest stocks by market capitalization (cap) in the U.S. The index is market-cap weighted , which means that the larger the value of the company, the larger the position it holds in the index. The one great thing about market-cap-weighted indexes is that they let their winners run and become larger contributors to the index over time, while stocks that underperform become smaller parts of the index.

The Vanguard S&P 500 ETF, meanwhile, replicates the performance of the index by holding the same stocks in the same proportion as the index. Known as an industry price leader, Vanguard charges a scant 0.03% expense ratio for its services. High expense ratios can drag on returns over time, and the Vanguard S&P 500 ETF fortunately has some of the lowest fees around.

The ETF has been a strong performer over the years, generating an average annual return of 12.8% over the past decade as of the end of June. The fund has been performing even better more recently, up 15.3% year to date as of the end of June and 24.5% over the past year.

One of the big benefits of ETF investing is instant diversification, and an investment in this Vanguard fund immediately gives you investments in just over 500 stocks across various sectors and industries. All the stocks, however, are from large-cap companies, which are generally more established companies.

While the ETF has investments across sectors, technology is by far its largest sector, representing nearly a third of its investments. Financial stocks are a distant second at about 12.5%.

The ETF's top holdings include well-known names such as Microsoft at 7.2% of its portfolio, chip giant Nvidia at 6.6%, iPhone maker Apple also at 6.6%, search leader Alphabet at 4.3% (when combining both its classes of shares), and e-commerce leader Amazon at 3.9%.

Image source: Getty Images.

Is now the time to buy the ETF?

One thing newer investors often worry about is whether now is a good time to buy. With the S&P 500 up strongly this year, that might be on the minds of many investors.

That's why one of the best strategies for investors, particularly when it comes to ETF investing, is to employ a strategy known as dollar-cost averaging . This is where investors will buy an ETF consistently at a set time regardless of price, usually in the same dollar increments. For example, this could be buying the ETF each week, each month, twice a month, or once a quarter, with a $500 investment each time.

This strategy helps reduce market timing risk. When the ETF is up, investors will buy fewer shares, and when it is down, they buy more shares. The S&P 500 has a long history of going up over the long term, so this is a great strategy for investors with a long time horizon.

Meanwhile, as investors become more experienced with investing over time, they can buy more industry-specific ETFs, such as the Vanguard Information Technology ETF (NYSEMKT: VGT) , which invests solely in technology stocks, or individual stocks themselves such as Microsoft or Nvidia.

Either way, investing helps create long-term wealth, so it is never too late nor too early to begin, regardless of experience. A long time horizon, diversification, and tried-and-true strategies such as dollar-cost averaging will go a long way in helping investors be successful over the long run.

The Vanguard S&P 500 ETF, meanwhile, can be a cornerstone investment for new and experienced investors alike.

Suzanne Frey, an executive at Alphabet, 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. Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy .