Should Vanguard S&P 500 ETF (VOO) Be on Your Investing Radar? (2024)
Zacks Equity Research
·3 min read
If you're interested in broad exposure to the Large Cap Blend segment of the US equity market, look no further than the Vanguard S&P 500 ETF (VOO), a passively managed exchange traded fund launched on 09/09/2010.
The fund is sponsored by Vanguard. It has amassed assets over $402.46 billion, making it one of the largest ETFs attempting to match the Large Cap Blend segment of the US equity market.
Why Large Cap Blend
Companies that fall in the large cap category tend to have a market capitalization above $10 billion. Overall, they are usually a stable option, with less risk and more sure-fire cash flows than mid and small cap companies.
Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments.
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for this ETF are 0.03%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 1.38%.
Sector Exposure and Top Holdings
ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Information Technology sector--about 29.60% of the portfolio. Financials and Healthcare round out the top three.
Looking at individual holdings, Microsoft Corp (MSFT) accounts for about 7.30% of total assets, followed by Apple Inc (AAPL) and Amazon.com Inc (AMZN).
The top 10 holdings account for about 26.66% of total assets under management.
VOO seeks to match the performance of the S&P 500 Index before fees and expenses. The S&P 500 Index measures the performance of the large-capitalization sector of the U.S. equity market.
The ETF has gained about 5.09% so far this year and was up about 24.36% in the last one year (as of 02/20/2024). In the past 52-week period, it has traded between $354.08 and $461.39.
The ETF has a beta of 1 and standard deviation of 17.39% for the trailing three-year period, making it a medium risk choice in the space. With about 504 holdings, it effectively diversifies company-specific risk.
Alternatives
Vanguard S&P 500 ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VOO is a great option for investors seeking exposure to the Style Box - Large Cap Blend segment of the market. There are other additional ETFs in the space that investors could consider as well.
The iShares Core S&P 500 ETF (IVV) and the SPDR S&P 500 ETF (SPY) track the same index. While iShares Core S&P 500 ETF has $434 billion in assets, SPDR S&P 500 ETF has $489.38 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.
Bottom-Line
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions.
ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VOO is a great option for investors seeking exposure to the Style Box - Large Cap Blend segment of the market.
Investing in the S&P 500 index fund, such as VOO, is a winning long-term strategy. Historical data shows that the market has consistently gone higher despite obstacles and downturns.
Investing in an S&P 500 fund can instantly diversify your portfolio and is generally considered less risky. S&P 500 index funds or ETFs will track the performance of the S&P 500, which means when the S&P 500 does well, your investment will, too. (The opposite is also true, of course.)
Warren Buffett has long recommended the S&P 500 index fund and ETF, and through his holding company Berkshire Hathaway, he also owns two of these types of investments: the Vanguard S&P 500 ETF (NYSEMKT: VOO) and the SPDR S&P 500 ETF Trust (NYSEMKT: SPY).
Based on 505 Wall Street analysts offering 12 month price targets to VOO holdings in the last 3 months. The average price target is $526.07 with a high forecast of $618.65 and a low forecast of $428.46. The average price target represents a 9.58% change from the last price of $480.07.
Over the past decade, you would have done even better, as the S&P 500 posted an average annual return of a whopping 12.68%. Here's how much your account balance would be now if you were invested over the past 10 years: $1,000 would grow to $3,300. $5,000 would grow to $16,498.
It's a bad idea to ever put all your money at once into a single investment. That would be like betting on red or black at the casino. Rather I would suggest dollar cost averaging into the S&P 500. You can have dollar cost averaging explained at any brokerage or even in a google search.
For instance, some ETFs may come with fees, others might stray from the value of the underlying asset, ETFs are not always optimized for taxes, and of course — like any investment — ETFs also come with risk.
For most individual investors, ETFs represent an ideal type of asset with which to build a diversified portfolio. In addition, ETFs tend to have much lower expense ratios compared to actively managed funds, can be more tax-efficient, and offer the option to immediately reinvest dividends.
Assuming an average annual return rate of about 10% (a typical historical average), a $10,000 investment in the S&P 500 could potentially grow to approximately $25,937 over 10 years.
The conglomerate holds positions in the SPDR S&P 500 ETF Trust and the Vanguard S&P 500 ETF (NYSEMKT: VOO). These two index funds share a couple of things in common. First, they're both exchange-traded funds (ETFs) that can be bought and sold like stocks.
VOO earns a top rating of Gold, while SPY earns the next best rating of Silver. Almahasneh says the reason is fees. VOO charges 0.03%, while SPY charges 0.09%. With all else equal, the fund with the lower fee is more aligned with investors' best interests.
An expense ratio of 0.0945% makes SPY more expensive for investors to invest in. Over a long period, this can lead to diminished returns for investors due to a weakened compound effect. An expense ratio of 0.03% makes VOO a more cost-efficient choice for long-term investors.
The summary of Vanguard's economic and market outlook for 2024 suggests that higher interest rates are here to stay. This development ushers in a return to sound money, and the implications for the global economy and financial markets will be profound.
Or, you could also invest in both, for example, by putting half in VOO and half in VTI. Here's a summary of which one to choose: If you want to own only the biggest and safest stocks, choose VOO. If you want more diversification and exposure to mid-caps and small-caps, choose VTI.
Investing in an ETF that tracks a financial services index gives you ownership in a basket of financial stocks versus a single financial company. As the old cliché goes, you do not want to put all your eggs into one basket. An ETF can guard against volatility (up to a point) if some stocks within the ETF fall.
ETFs can be safe investments if used correctly, offering diversification and flexibility. Indexed ETFs, tracking specific indexes like the S&P 500, are generally safe and tend to gain value over time. Leveraged ETFs can be used to amplify returns, but they can be riskier due to increased volatility.
You expose your portfolio to much higher risk with sector ETFs, so you should use them sparingly, but investing 5% to 10% of your total portfolio assets may be appropriate. If you want to be highly conservative, don't use these at all.
Introduction: My name is Aron Pacocha, I am a happy, tasty, innocent, proud, talented, courageous, magnificent person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
