As far as exchange traded funds are concerned, Vanguard S&P 500 ETF (VOO) stands out as a top option for long-term investors to consider. This ETF allows investors to gain exposure to some of the largest companies in the U.S., retaining some impressive diversification at a very low cost. Thus, many active and passive investors continue to hold VOO in their portfolios (and for good reason). I happen to be one such investor, and think this ETF is a great way to create a wealth-building base over the long-term.
Of course, there are plenty of other index-tracking ETFs to choose from. The rise of low-cost and broadly-diversified ETFs has providing a boon to investors, but many may ask why one may be preferable to another. Let’s dive into why the Vanguard S&P 500 ETF does seem like a compelling option right now, and why this fund could outperform other similar ETFs over the long-term.
Key Points About This Article:
- Index-tracking exchange traded funds have ballooned in recent years, as investors look for passive investing opportunities in this current market.
- The Vanguard S&P 500 ETF (VOO) is among the leading options for good reason, and here’s why investors may want to take a stab at this ETF right now.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.
What Is the Vanguard S&P 500 ETF?
As many investors are aware, the S&P 500 tracks the largest publicly-traded companies in the U.S. Accordingly, for investors looking to “buy the market,” purchasing shares in each company (and weighting them according to their size and performance) can be an extremely costly and daunting task, and one which previously required significant fees to do so.
Companies like Vanguard have simplified the process, buying shares of all publicly-traded companies in bulk, and passing the savings on to investors who choose to put money into their ETFs. By buying shares in VOO, investors can effectively buy a slice of the market, as represented by the portfolio of companies in this ETF. Currently, VOO holds 503 of the most valuable companies in the United States, which are weighted according to market capitalization. So, you’ll get a lot more Nvidia and Microsoft relative to the other 498 companies in the index (equal weighted indexes are different), and that’s something to take into consideration.
The thing is, for a long period of time, market cap-weighted index funds have outperformed equal-weighted funds for the reason that mega-cap tech companies have continued to lead the market higher. For investors who think this will be the case, investing in VOO (for its very reasonable 0.03% expense ratio) makes a lot of sense in this current environment.
As of November 12th, these are the top 10 positions in VOO and each stocks total weigh of the fund:
| Ticker | Company Name | % of Fund | Market Value |
| AAPL | Apple | 7.25% | $92,764,698,915 |
| MSFT | Microsoft | 6.55% | $83,777,999,046 |
| NVDA | NVIDIA | 6.11% | $78,250,822,890 |
| AMZN | Amazon | 3.56% | $45,585,155,818 |
| META | Meta | 2.56% | $32,758,628,896 |
| GOOGL | Alphabet Class A | 1.99% | $25,452,960,525 |
| BRK.B | Berkshire Hathaway Class B | 1.73% | $22,082,132,895 |
| GOOG | Alphabet Class C | 1.64% | $21,036,289,857 |
| AVGO | Broadcom | 1.64% | $21,024,855,105 |
| TSLA | Tesla | 1.49% | $19,014,332,288 |
Why This Particular ETF is Appealing
As mentioned, the key appeal to VOO is the ability for investors to get world-class diversification to the best companies in the market at an extremely low cost. Having this exposure tilted toward the biggest (and often some of the fastest-growing) companies has certainly drove excellent returns for investors of late.
In fact, over the past decade, the Vanguard S&P 500 ETF delivered a 12.96% average annual return, totaling 238.3% on a cumulative basis. This means a $20,000 investment made 10 years ago would now be worth $57,660 today. That’s some serious capital appreciation for investors looking to sit on their hands, and “buy the market,” so to speak.
Instead of trying to beat the indexes, many investors are looking to simply generate market-level returns. For those looking to do so, VOO remains a top option due to the reputation Vanguard provides, as well as its history in the ETF space.
I’m a long-term bull on ETFs relative to stock picking, and while I do nibble on certain names, I think owning such funds over the long-term is a great way to stay invested and have portfolio stability, something millions of other investors tend to agree on.
Is VOO a Buy? The Answer Is Yes.
Investing in an index-tracking ETF is among the simplest ways for long-term investors to create meaningful wealth over a long period of time. Dollar cost averaging into VOO in a retirement account or brokerage account can allow investors to put the entire investing process on autopilot. That’s something I think is extremely valuable, and often overlooked by many investors. Sleeping at night has some serious value for me personally, and I think many investors would probably agree that’s valuable to them.
While the market can decline significantly over short time frames, over the very long-term, this ETF has gone no where but up and to the right. For those who are looking for a vehicle to invest in the stock market, VOO would be my preferred choice of how to do so right now (though I do own some other index-tracking ETFs I’ll discuss as well in future pieces).
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