From April 2 to April 8, the Vanguard S&P 500 ETF (NYSEArca: VOO | VOO Price Prediction) plummeted a stomach-churning 12% as investors revolted against the implications of President Trump’s tariffs war-against-the-rest-of-the-world. The stock market bounced right back 9% last week after the President declared a unilateral ceasefire, however, and a 90-day pause in implementing (most of) the tariffs.
In the days since, the oscillations in the market have been milder, and as of noon ET on Monday, at least, the stock market seems to have found some equilibrium with “the Voo” trading just about $490. That’s still down more than 5% from where it was before the tariffs tantrum broke out, but it’s a bit easier of a drop for the ol’ tummy to take.
Still, investors may be wondering if now’s a safe time to re-enter the stock market, and whether the Voo is a safe way to do it.
On that score, some of the smartest (and wealthiest) players on the stock market seem to agree: Yes.
What is the Vanguard S&P 500 ETF?
Let’s start with “what is the S&P 500” first! The S&P 500 is an index aggregating and weighting the stock prices of the 500 largest publicly-traded companies in America. Because of the size and the importance of the companies on this list, it’s often considered a proxy for “the stock market” in general.
Next, the Vanguard S&P 500 ETF refers to an exchange-traded fund, which is to say, a mutual fund that trades like a stock, such that you could (theoretically) buy it and sell it multiple times on a given day, that is sponsored by financial powerhouse Vanguard. Like a mutual fund, “the Voo” charges a small fee for managing its holdings for you. But the fee is de minimis, only 0.03% of the value of the amount you invest. Thus, maintaining a $10,000 investment in the Voo will cost you only $3 per year.
Investing in the Vanguard S&P 500 ETF, therefore, can perhaps most usefully be thought of as a way to cheaply buy (or sell) the entire stock market any time the market is open, just as if you were buying (or selling) an individual stock.
Why millionaires and even billionaires love the Voo
The next question then becomes, should you buy the Voo, or sell it? And the consensus of millionaires (and even billionaires) weighs heavily towards the former. Historical data show that the Vanguard S&P 500 ETF closely tracks the performance of the S&P 500, and the stock market, in general, such that over long periods of time you can reliably anticipate that the value of your money will rise at about 10% (not counting inflation or fees) annually.
Granted, in any given year, the stock market… and the S&P 500… and the Vanguard S&P 500 ETF too of course, can go either up or down. In fact, as the past couple weeks have demonstrated, you may not even have to wait a whole year to see the stock market go both up and down, and dramatically! But still, the long-term trend holds true:
10% per year, and trending sharply up the whole way, so long as you are patient, keep your money in the market, don’t try to time the market, and sell.
How confident are millionaires and billionaires that this approach to investing works? In 2008, in the middle of the Financial Crisis, Warren Buffett himself made a bet the head of the Protégé Partners LLC hedge fund that he could make more money investing in the S&P 500 over a 10-year timespan, than Protégé’s best stock analysts could make using their most sophisticated investing algorithms.
Nine years later, Protégé conceded that it had lost the bet. It total performance over the contest period was a meager 22%, versus a gain of better than 85% for the S&P.
All of which goes to show you, that if you want to make money in the stock market, the easiest way to do that is just to buy the whole stock market (or a representative sample like the Vanguard S&P 500 ETF), and wait patiently. You won’t “beat” the market…
But you’ll beat just about anybody else who tries to.
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