I invested in VOO but want to branch out. What options should I look at?

There’s a reason investing legend Warren Buffett has long said that for everyday savers, putting money into the S&P 500 index is a smart bet. The S&P 500 consists of the 500 largest publicly traded companies as measured by market capitalization.

Put another way, when you invest in the S&P 500, you’re getting a diverse mix of established businesses. So if you decide that you’re only going to invest your money in an S&P 500 ETF like the Vanguard S&P 500 ETF (VOO), that’s not necessarily a poor choice.

In this Reddit post, we have someone who’s 36 years old who only has money in VOO. The poster is looking for ways to branch out, and here are some options they can consider.

1. Individual stocks

While VOO may be great for diversification, one major drawback is that you can’t use it to outperform the stock market on a whole. If that’s your goal, then you may want to branch out into individual stocks.

Before adding any given stock to your portfolio, though, you’ll need to do your research. That means assessing each company’s:

• Financial health, including how it manages debt
• Competitive edge
• Risks and weaknesses
• Management team

It’s also a good idea to buy individual stocks across a range of market sectors.

Keep in mind that because the S&P 500 is a market cap-weighted index, companies with a greater market cap have more of an influence on VOO’s performance. Because of this, you may not want to double up by buying shares of those stocks individually.

Some of the companies that have the largest market cap within the S&P 500 include:

• Nvidia
• Microsoft
• Apple
• Alphabet
• Amazon

Notice that these are all tech companies? For this reason, if you’re going to buy individual stocks, you may want to focus on companies in other industries and steer clear of tech. Other options to look at include:

• Energy
• Banks
• Auto
• Healthcare
• Retail

2. Mid- and small-cap ETFs

While VOO does offer a lot of diversification, it only tracks the largest U.S. companies, leaving small and mid-cap stocks out of the mix. For this reason, if you’re looking beyond VOO, you may want to put some of your money into mid- or small-cap ETFs.

Now it’s worth noting that smaller companies can be riskier because they’re often not as established as larger businesses. But that doesn’t mean they’re not a good choice. In many cases, they can lead to stronger returns.

3. Real estate

Branching out into real estate allows you to invest in assets whose value may not rise and fall in line with the S&P 500. Buying a rental property, for example, could allow you to generate income regardless of what the stock market is doing.

If you don’t like the idea of owning physical real estate, REITs, or real estate investment trusts, are another option. Some REITs trade publicly, while others are private.

Publicly traded REITs are typically a lot more liquid than private REITs, where your money could get stuck for a considerable amount of time. Private REITs, on the other hand, are often less volatile. And because they’re less liquid, they often compensate investors in the form of greater returns.