Is Vanguard S&P 500 ETF a good investment?
Vanguard S&P 500 ETF: Performance Highlights
Even with occasional slumps and down periods, the Vanguard S&P 500 ETF's long-term results are impressive for a broad ETF. That's why your focus should be on investing consistently through thick and thin. You'll likely be thanking yourself for it a decade or two down the road.
In the last 30 Years, the Vanguard S&P 500 (VOO) ETF obtained a 10.29% compound annual return, with a 15.12% standard deviation.
| Fund (ticker) | 5-year annual returns | Expense ratio |
|---|---|---|
| iShares Core S&P 500 ETF (IVV) | 15.2% | 0.03% |
| Schwab S&P 500 Index (SWPPX) | 15.2% | 0.02% |
| Vanguard 500 Index Fund (VFIAX) | 15.2% | 0.04% |
| Fidelity 500 index fund (FXAIX) | 15.2% | 0.015% |
Investors make an initial minimum investment — typically around $3,000 — and pay annual costs to maintain the fund, known as an expense ratio, based on a small percentage of your cash invested in the fund.
If you don't want to put a lot of effort into managing your investments, then S&P 500 ETFs are a good solution. But if you're willing to do the work, then you might do even better in the long run with a portfolio of hand-picked stocks (although, the odds are against you).
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.)
In 1980, had you invested a mere $1,000 in what went on to become the top-performing stock of S&P 500, then you would be sitting on a cool $1.2 million today.
| FUND (TICKER) | EXPENSE RATIO | 10-YEAR RETURN AS OF MARCH 1 |
|---|---|---|
| Vanguard S&P 500 ETF (VOO) | 0.03% | 11.99% |
| Vanguard Total Stock Market ETF (VTI) | 0.03% | 11.43% |
| Vanguard Total Bond Market ETF (BND) | 0.03% | 1.77% |
| Vanguard Total International Stock ETF (VXUS) | 0.08% | 4.07% |
Vanguard S&P 500 ETF (VOO)
VOO has a dividend yield of 1.34% and paid $6.41 per share in the past year. The dividend is paid every three months and the last ex-dividend date was Mar 22, 2024.
What is better S&P 500 Index Fund or ETF?
The Bottom Line. Both index mutual funds and ETFs can provide investors with broad, diversified exposure to the stock market, making them good long-term investments suitable for most investors. ETFs may be more accessible and easier to trade for retail investors because they trade like shares of stock on exchanges.
Both the Vanguard S&P 500 Index Fund and the SPDR S&P 500 ETF track the performance of the S&P 500 index, which represents a broad selection of large-cap U.S. stocks. The key difference lies in their structure: the Vanguard fund is a mutual fund, while the SPDR ETF is an exchange-traded fund.
- The Best Vanguard Mutual Funds Of March 2024.
- Vanguard Russell 1000 Growth Index Fund (VRGWX)
- Vanguard FTSE Social Index Fund (VFTNX)
- Vanguard Growth & Income Fund (VGIAX)
- Vanguard Target Retirement 2050 Fund (VFIFX)
- Vanguard High-Yield Corporate Fund (VWEAX)
- Vanguard High-Yield Tax-Exempt Fund (VWALX)
Vanguard Brokerage doesn't charge additional fees for a purchase, a sale, or an exchange of any load mutual fund offered through our program. You must buy and sell Vanguard ETF Shares through Vanguard Brokerage Services (we offer them commission-free) or through another broker (which may charge commissions).
S&P 500 5 Year Return is at 83.02%, compared to 79.20% last month and 46.29% last year. This is higher than the long term average of 45.06%. The S&P 500 5 Year Return is the investment return received for a 5 year period, excluding dividends, when holding the S&P 500 index.
The historical average yearly return of the S&P 500 is 12.02% over the last 10 years, as of the end of December 2023. This assumes dividends are reinvested. Adjusted for inflation, the 10-year average stock market return (including dividends) is 8.93%.
ETFs can be a great investment for long-term investors and those with shorter-term time horizons. They can be especially valuable to beginning investors. That's because they won't require the time, effort, and experience needed to research individual stocks.
It might actually lead to unwanted losses. Investors that only invest in the S&P 500 leave themselves exposed to numerous pitfalls: Investing only in the S&P 500 does not provide the broad diversification that minimizes risk. Economic downturns and bear markets can still deliver large losses.
Disadvantages. The following are some of the main drawbacks of investing in the S&P 500: The index is dominated by large-cap companies: The S&P 500 is dominated by large-cap companies, with its 10 biggest constituents accounting for almost one-third of the index.
ETFs are subject to market fluctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses. Unlike mutual funds, ETF shares are bought and sold at market price, which may be higher or lower than their NAV, and are not individually redeemed from the fund.
Should I invest in S&P 500 now or wait?
Warren Buffett recommends an S&P 500 index fund more than any other investment for most people. There's no value in trying to time the market and wait for another correction before putting money into an index fund.
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.
Buffett has said that he's advised his wife to invest all her money in the S&P 500 after his death. It's simple to calculate how much money you'd have today if you did just that 20 years ago with $10,000. The total would be more than $65,000, which implies a return of 555%.
For example, if an investment scheme promises an 8% annual compounded rate of return, it will take approximately nine years (72 / 8 = 9) to double the invested money.
The value of the $1 million today is the value of $1 million discounted at the inflation rate of 3.2% for 40 years, i.e., 1 , 000 , 000 ( 1 + 3.2 % ) 40 = 283 , 669.15.
