2 Dividend ETFs to Buy With $500 and Hold Forever
By Reuben Gregg Brewer | July 5, 2025
Investors with $500 to invest and an interest in dividend-paying stocks have plenty of choices. However, $500 might not be sufficient to build a well-diversified portfolio of individual dividend stocks on its own. In this case, a smart strategy is to consider exchange-traded funds (ETFs) that focus on dividend income, offering diversification and steady dividend payment potential.
Two standout dividend ETFs worth considering for a long-term buy-and-hold strategy are the Vanguard Dividend Appreciation ETF (VIG) and the Schwab U.S. Dividend Equity ETF (SCHD). Each caters to different types of dividend investors.
Vanguard Dividend Appreciation ETF (VIG): For Dividend Growth Investors
The Vanguard Dividend Appreciation ETF primarily targets dividend growth investors. This ETF invests in companies that have a strong track record of raising their dividends year after year. Such stocks often represent financially stable firms with solid earnings and resilient business models.
As of July 3, 2025, VIG trades at around $207.92 per share, although fractional shares can make it accessible to investors with $500. The focus on companies with consistent dividend increases can offer both potential income growth over time and some protection against inflation. Investors looking to build wealth through steadily increasing dividend income may find this ETF particularly appealing.
Schwab U.S. Dividend Equity ETF (SCHD): For High-Yield Seekers
On the other hand, the Schwab U.S. Dividend Equity ETF is designed for investors seeking higher dividend yields. SCHD selects companies with strong dividend histories but focuses more on current yield rather than dividend growth alone. This approach might appeal to investors who prioritize immediate income distribution over long-term growth.
SCHD typically invests in high-quality U.S. companies with attractive dividend payouts, making it a solid choice for income-focused portfolios. Like VIG, SCHD offers broad diversification across sectors and industries but with a tilt towards stronger yields.
Why ETFs for $500 Investment?
With a $500 investment, buying individual dividend stocks to achieve diversification can be challenging, given that many dividend-paying stocks may cost more than $50 per share. ETFs allow investors to pool their money into a basket of carefully selected dividend-paying stocks, enabling instant diversification and reducing company-specific risk.
Both VIG and SCHD are well-regarded in the market for their careful stock selection, reasonable expense ratios, and consistent dividend payouts — making them excellent options for investors aiming to hold dividend investments forever.
Final Thoughts
Whether you prefer to prioritize dividend growth or seek high current income, the Vanguard Dividend Appreciation ETF and the Schwab U.S. Dividend Equity ETF offer compelling options to build a dividend portfolio with $500. These ETFs provide a balanced combination of income potential, diversification, and long-term growth prospects — suitable for a buy-and-hold investing mindset.
Before investing, consider your personal income needs, risk tolerance, and investment goals. Both funds have unique qualities that can help meet different dividend investing strategies for building wealth over time.
Investing in dividend ETFs can be a prudent way to secure ongoing income while benefiting from the growth potential of quality companies. With $500, starting with either of these ETFs gives you a strong foundation to hold forever.
This article was originally published on The Motley Fool and is shared here for educational purposes.