The Vanguard S&P 500 ETF (VOO) is a low-cost, passively managed fund that seeks to replicate the performance of the S&P 500 Index, encompassing 500 of the largest US companies. Ideal for diversified, long-term investments, VOO offers broad exposure to leading sectors like technology, healthcare and finance, making it a core holding for many investors seeking equity market growth.
How to buy shares in the Vanguard S&P 500 ETF
Open a brokerage account. Choose from our top broker picks or compare brokers in depth. Then, complete an application.
Fund your account. Add money to your account via bank transfer, debit card or credit card.
Search the platform by ticker symbol. TSLA in this case.
Choose an order type. Place a market order or limit order with your preferred number of shares or dollar amount.
Submit the order. It’s that simple.
The whole process can take as little as 15 minutes. You’ll need a smartphone or computer, an internet connection, your passport or driving license and a means of payment.
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Understanding the Vanguard S&P 500 ETF
The Vanguard S&P 500 ETF (VOO) seeks to track the performance of the S&P 500 Index, which includes 500 of the largest publicly traded US companies. This ETF is passively managed and aims to reflect the overall performance of the US equity market’s large-cap segment. VOO covers a broad range of sectors, including technology, healthcare, finance, consumer discretionary and industrials. Its top holdings typically include leading companies like Apple (AAPL), Microsoft (MSFT), Amazon (AMZN) and Alphabet (GOOGL), providing investors with exposure to some of the most influential firms in the global economy.
Performance and historical returns
Historically, the Vanguard S&P 500 ETF (VOO) has delivered returns that closely mirror the S&P 500 Index, which has shown an average return of about 10% over the past 10 years.(1) While past performance is not indicative of future results, VOO has demonstrated resilience and growth, especially over extended periods. Investors often favor VOO for its consistent performance, low volatility relative to individual stocks and ability to recover from market downturns.
Benefits of investing in VOO
Diversification. VOO provides exposure to 500 large-cap US companies across various sectors, thereby reducing the risk associated with investing in individual stocks.
Low cost. The ETF is known for its low expense ratio, which is significantly lower than many actively managed funds. This helps investors keep more of their returns over time.
Passively managed. As a passively managed fund, VOO aims to replicate the performance of the S&P 500 Index rather than outperform it. This approach often results in lower fees and less frequent trading, which can be advantageous for long-term investors.
Liquidity. VOO is highly liquid, meaning it is easy to buy and sell shares without significantly affecting the market price. This is important for investors who might need to access their funds quickly.
Historical performance. While past performance doesn’t guarantee future results, the S&P 500 has historically delivered strong long-term returns, making VOO a favored choice for investors looking to build wealth over time.
Drawbacks of investing in VOO
Market risk. Although VOO is diversified within the large-cap segment, it is still subject to overall market risk. Economic downturns, market corrections and systemic risks can lead to losses.
Limited exposure. VOO focuses exclusively on large-cap US companies, providing limited exposure to small-cap stocks, international markets and emerging economies. This can hinder portfolio performance during periods when these other segments outperform large-cap stocks.
Sector concentration. The S&P 500 Index can sometimes be heavily weighted towards specific sectors, such as technology. This sector concentration can increase the risk if a particular sector underperforms.
Passive management. While passive management leads to lower costs, it also means that the ETF does not actively seek to outperform the market. Investors looking for strategies to outperform the S&P 500 might find this approach limiting.
Dividend yield. VOO tends to have lower dividend yields compared to some other investment options, such as dividend-focused ETFs or individual dividend stocks.
Is now a good time to buy the Vanguard S&P 500 ETF?
Determining whether now is a good time to buy the Vanguard S&P 500 ETF (VOO) depends on various factors, including market conditions, economic outlook and your individual financial goals. As a long-term investment, VOO is designed to provide broad exposure to the US stock market, mirroring the performance of the S&P 500. Historically, the market has trended upwards over long periods, so many investors consider VOO a solid choice for a diversified portfolio. Consider consulting with a financial advisor to ensure it aligns with your investment strategy and current economic conditions.
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Frequently asked questions
How can I buy Vanguard S&P 500 ETF?
Buy the Vanguard S&P 500 ETF through a brokerage account or IRA. Log in to your brokerage account, search by ticker symbol VOO, decide how much to invest and buy your shares.
Can I buy ETFs directly from Vanguard?
You can buy ETFs directly from Vanguard if you have a Vanguard brokerage account.
Matt Miczulski is an investments editor at Finder. With over 450 bylines, Matt dissects and reviews brokers and investing platforms to expose perks and pain points, explores investment products and concepts and covers market news, making investing more accessible and helping readers to make informed financial decisions.
Before joining Finder in 2021, Matt covered everything from finance news and banking to debt and travel for FinanceBuzz. His expertise and analysis on investing and other financial topics has been featured on CBS, MSN, Best Company and Consolidated Credit, among others. Matt holds a BA in history from William Paterson University. See full bio
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