The Vanguard 500 Index Fund ETF (NYSEARCA:VOO) is one of the best ways for investors to get exposure to the S&P 500, and in turn, the S&P 500 is one of the best ways for investors to get exposure to the stock market. Although there are many macro concerns today and the S&P 500 recently entered a bear market, I continue to believe that investors who hold VOO and buy more slowly over time will see very positive long-term returns. I also believe that VOO is somewhat undervalued today.
Why VOO?
Most investors are probably already familiar with VOO and are more interested in whether now is a good time to buy or sell the S&P 500, but for posterity, I'll briefly compare VOO with other similar options.
There are many ETFs for investors to choose from these days. The most popular ones as measured by assets under management are passively managed and track diversified indexes of large-cap stocks like the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100.
Among these three indexes, the S&P 500 is the most popular because it's the most diversified across sectors, has a sensible market capitalization-based weighting, and has a good mix of both growth and value stocks. That makes it a good option for many types of investors, especially those who don't have the time or expertise to pick their own stocks. Popular financial figures like Warren Buffett and Burton Malkiel recommend that most retail investors allocate the majority of their stock portfolio to an S&P 500 ETF rather than dealing with the high risk/high reward nature of picking individual stocks.
There are three main ETFs that track the S&P 500 index: SPY (run by State Street), IVV (run by BlackRock), and VOO (run by Vanguard). Of the three, SPY has the most assets under management and liquidity, while VOO has the least. However, SPY charges a 0.09% expense ratio, while VOO and IVV recently dropped to 0.03%. Thus, for long-term retail investors who don't need high liquidity or options, IVV and VOO are both good choices.
Timing The Market
Assuming you want to own an S&P 500 ETF like VOO, the next question is whether now is a good time to buy, hold, or sell.
The most tried-and-true approach to timing the market is simply not to do it. Instead, investors can simply dollar cost average into VOO when they have some spare cash that they won't need to spend for years. Historically, those who DCA have always made money in the S&P 500, although unlucky investors who buy while the market is going down might take a few years to see positive returns.
If you're buying VOO, it's probably because you don't want to deal with the risk and time commitment associated with individual stocks. So, why not take the same approach to timing the market? That is, reduce risk by buying slowly over time, rather than introducing additional risk and stress by trying to guess what the market is going to do in the short term. Most of the best investors like Warren Buffett are always long stocks and avoid making short-term market predictions.
Although DCA is great in theory, it can't always be done. Some investors have a large pile of cash they don't want to sit on, and some investors find that DCA isn't a good fit for their personality. So, let's take a look at what would happen to investors who lump sum invest in the most extreme cases.
The above graphic from A Wealth Of Common Sense shows what would happen if you invested all of your money right before a major crash and never DCA'd after that. We can see that on every time interval of 20 years or longer, investors would be better off in the market than in cash, and that in 6 of 8 scenarios they would even be better off after 10 years. So, at least historically, there's never really been a bad time to lump sum invest.
On the other side of the coin, investing at an exact market bottom can produce incredible returns that widely outperform DCA. For example, investing in Feb 2020 would have produced 11% annualized returns since, while investing in Mar 2020 would have produced a nearly 35% CAGR. Similarly, investing at the 2009 bottom produced a 14% CAGR compared to 7% since 2007.
Most investors who lump sum invest will not be so (un)lucky as to buy at an exact peak or valley, but instead will buy somewhere in the middle and will likely see returns more similar to those of DCA. DCA is just a way to "guarantee" that average buy-in price and the average returns associated with it.
The Current Market
Of course, VOO already fell 20% this year, so investors who lump sum invest now can at least take comfort in knowing that they won't be buying at the exact peak. The graphic in the previous section shows that there could be a lot further to fall in the most historic crashes. However, those happen fairly infrequently, usually less than once per decade.
On the other hand, bear markets where the market falls at least 20% are more common, typically occur once every 3-4 years and bottom out before a fall of 30% or more. Although the results differ depending on the time period you consider, whether you include dividends, and a few other factors, in general, bear markets typically last about a year, meaning that investors who buy when the market has fallen 20% usually see a 20% return on their investment within the following years.
This seems counter-intuitive, since right now there is a lot of bad news with negative GDP growth, inflation, a hawkish Fed, the Russia/Ukraine war, the China lockdowns, stocks crashing but still having high P/E ratios, mixed earnings, supply chain issues, etc. Fear sells, so news outlets love to cover these types of stories.
However, bear markets often bottom out when sentiment is most negative, which is before the news becomes positive. It's not usually possible to time the market based on news or even most macro factors.
For example, I pointed out to members of Tech Investing Edge that the reversal of the 30-year trends of globalization and falling interest rates is being spun as an obvious reason why the market will continue falling. However, even if this reversal continues, it's rarely pointed out that this 30-year period actually had below-average stock market returns, with the S&P 500 retuning an average of 8% per year compared to its historical average of 10.5%.
Rather than look at macro factors, I've shared multiple valuation models with Tech Investing Edge members that indicate VOO is actually slightly undervalued today relative to the growth potential and quality of the companies that compose it. One model is from me and the other is from Morningstar. Even if I'm right that the market is undervalued, it doesn't mean that it will immediately rebound in the short term, because short-term movement is unpredictable. However, it would mean that people who lump sum invest today would see a better-than-average long-term return.
Conclusion
Investing in the S&P 500 through VOO is a proven way to build wealth over time. That trend should continue in the future as long as the USA continues to have leading companies and growing GDP. Building this wealth requires patience, sometimes decades of patience. But history shows that long-term investors are unlikely to regret buying VOO today, especially those who increase their exposure slowly over time.
I hope you enjoyed my research. I'm the author of Tech Investing Edge, a service focused on growth stocks for investors with a 10+ year time horizon. I use my "edge" from working in the tech sector to understand tech companies' long term growth potential and share my best investment ideas in cloud, SaaS, crypto, cybersecurity, and more with members. I'm currently offering a two week free trial to new members, so I hope you'll check it out!
Based on 6,345 Wall Street analysts offering 12 month price targets to VOO holdings in the last 3 months. The average price target is $435.64 with a high forecast of $518.24 and a low forecast of $351.11. The average price target represents a 14.89% change from the last price of $379.18.
So when is the ideal time? "Middle of the day is generally best, and if there are international (European) securities in the ETF, trading in the morning will ensure you get prices closest to fair value," Nadig explains.
ETFs are great for stock market beginners and experts alike. They're relatively inexpensive, available through robo-advisors as well as traditional brokerages, and tend to be less risky than investing individual stocks.
The top reasons for closing or liquidating an ETF include a lack of investor interest and a limited amount of assets. An investor may not choose an ETF because it is too narrowly-focused, too complex, or has a poor return on investment.
What is an inverse ETF? An inverse ETF is set up so that its price rises (or falls) when the price of its target asset falls (or rises). This means the ETF performs inversely to the asset it's tracking. For example, an inverse ETF may be based on the S&P 500 index.
Vanguard S&P 500 (VOO): Historical Returns. In the last 30 Years, the Vanguard S&P 500 (VOO) ETF obtained a 9.80% compound annual return, with a 14.96% standard deviation. In 2022, the ETF granted a 1.37% dividend yield.
Every quarter or every 6 months when you receive your dividend payment, just log into your broker account and sell off a small number of shares in your ETFs to access extra cash. That is the right time to sell your ETFs.
Stock prices tend to fall in the middle of the month. So a trader might benefit from timing stock buys near a month's midpoint—the 10th to the 15th, for example. The best day to sell stocks would probably be within the five days around the turn of the month.
If you hold ETF shares for one year or less, then gain is short-term capital gain. If you hold ETF shares for more than one year, then gain is long-term capital gain.
1. Vanguard S&P 500 ETF (VOO -0.54%) Legendary investor Warren Buffett has said that the best investment the average American can make is a low-cost S&P 500 index fund like the Vanguard S&P 500 ETF.
ETFs are very safe and are an excellent option for long-term investments. According to experts, ETFs are not that volatile and show a slight change in their prices compared to stocks and indices because they are diversified and pooled investments of many investors.
Investors looking to weather a recession can use exchange-traded funds (ETFs) as one way to reduce risk through diversification. ETFs that specialize in consumer staples and non-cyclicals outperformed the broader market during the Great Recession and are likely to persevere in future downturns.
An ETF shutting down is not the end of the world. The fund is liquidated and shareholders are paid in cash. It's not fun, though. Often, the ETF will realize capital gains during the liquidation process, which it will pay out to the shareholders of record and that could mean an unnecessary tax burden.
maintain their exchange listing may no longer rely on the ETF Rule and must satisfy individual redemption requests within seven days pursuant to Section 22(e) of the 1940 Act or liquidate if not listed on an exchange. See ETF Release at 61.
10-Year Average Annualized Return. We believe the SPDR SSGA Multi-Asset Real Return ETF might be the best inflation ETF. This actively managed fund holds shares of other ETFs that track market sectors expected to outperform the inflation rate.
Leveraged ETF prices tend to decay over time, and triple leverage will tend to decay at a faster rate than 2x leverage. As a result, they can tend toward zero.
According to BetaShares, the ETF industry will bounce back in 2023 after a year of market decline. In their end of year review, the ETF provider forecast industry funds under management (FUM) to exceed $150 billion in assets by the end of 2023.
VOO has low fees, a low expense ratio, and no minimum investment. This makes it more accessible for newer investors who may not have an extra $3,000 to drop into VFIAX. As of March 2023, VOO has $774.8 billion in total assets and $274.3 billion in net assets with 507 total holdings.
VOO specifically is among our best ETFs for beginners because, while it does what most other S&P 500 index funds do, it's cheaper than virtually all the rest. But you can get the exact same 0.03% expense ratios from two other funds: the iShares Core S&P 500 ETF (IVV) and the SPDR Portfolio S&P 500 ETF (SPLG).
In general, dividend yields of 2% to 4% are considered strong, and anything above 4% can be a great buy—but also a risky one. When comparing stocks, it's important to look at more than just the dividend yield.
Just as with individual securities, when you sell shares of a mutual fund or ETF (exchange-traded fund) for a profit, you'll owe taxes on that "realized gain." But you may also owe taxes if the fund realizes a gain by selling a security for more than the original purchase price—even if you haven't sold any shares.
With the outlook for earnings, liquidity, growth and credit all poor and likely to translate into heightened volatility over the next year, now is not the time to buy and hold broad equities. The S&P 500 earnings yield less six-month T-Bill yield disparity is at its lowest point in over 20 years.
Panic selling when the stock market is going down can hurt your portfolio instead of helping it. There are many reasons why it's better for investors to not sell into a bear market and stay in for the long term.
What is this? The first trading day is the best (from the close of the last trading day to the close of the first trading day). The worst trading days of the month to trade stocks are trading days number 13, 14, and 22.
At least once a year, check the performance of your portfolio. For most investors, depending on their tax circ*mstances, the ideal time to do this is at the beginning or end of the calendar year. Compare each ETF's performance to that of its benchmark index.
According to Peter Lynch's book One Up on Wall Street (1989), it's because when companies have bad news to release, they do it on Fridays - so the market responds on Mondays.
ETFs can provide an easy way to be diversified and as such, the investor may want to have 75% or more of the portfolio in ETFs." To that end, Conzo says a more sophisticated investor may have additional needs.
Investors might sell a stock if it's determined that other opportunities can earn a greater return. If an investor holds onto an underperforming stock or is lagging the overall market, it may be time to sell that stock and put the money to work in another investment.
Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification. But the number of ETFs is not what you should be looking at. Rather, you should consider the number of different sources of risk you are getting with those ETFs.
If you're looking for an easy solution to investing, ETFs can be an excellent choice. ETFs typically offer a diversified allocation to whatever you're investing in (stocks, bonds or both). You want to beat most investors, even the pros, with little effort.
Does it make sense to have both VTI and VOO? For most investors, it probably doesn't make sense to own both. VTI and VOO both provide great diversification at a low cost. However, you may find that your retirement plan at work doesn't offer a total stock market index fund like VTI.
If you like the name-brand recognition of the S&P 500 and want to stick to large-caps, then VOO might be the better option. If you don't mind some mid and small-cap exposure, then VTI could be a good pick. Investors can potentially also use both as tax-loss harvesting pairs.
Bottom Line. ETF benefits, including simplicity, low expenses and tax efficiency, make ETFs a worthwhile investment for retirement. Popular types of ETFs for retirement include dividend ETFs, fixed-income ETFs and real estate ETFs.
Eric Balchunas, an ETF analyst at Bloomberg Intelligence, notes that during the past five years, 1,050 ETFs have launched. During the same period, more than 900 ETFs have folded. Their average lifespan is just 3.4 years.
Vanguard is paid by the funds to provide administration and other services. If Vanguard ever did go bankrupt, the funds would not be affected and would simply hire another firm to provide these services.
If you hold ETF shares for one year or less, then gain is short-term capital gain. If you hold ETF shares for more than one year, then gain is long-term capital gain.
Key Takeaways. ETFs allow investors to circumvent a tax rule found among mutual fund transactions related to declaring capital gains. When a mutual fund sells assets in its portfolio, fund shareholders are on the hook for those capital gains.
A trader can hold the majority of these ETFs including TQQQ, FAS, TNA, SPXL, ERX, SOXL, TECL, USLV, EDC, and YINN for 150-250 days before suffering a 5% underperformance although a few, like NUGT, JNUG, UGAZ, UWT, and LABU are more volatile and suffer a 5% underperformance in less than 130 days and, in the case of JNUG ...
According to Dalbar research, a U.S.-based firm that tracks investor behaviour by looking at buy and sell decisions of mutual funds, the average return for investors holding S&P 500 benchmarked funds have experienced a return of about 3.66 per cent while the buy and hold ETF return would have been 10.35 per cent over ...
What You Should Do if Your ETF Closes. Usually, it's best to sell your shares as soon as you get the notice. Before you sell, compare the share price to the published NAV, which is available from the sponsor.
The single biggest risk in ETFs is market risk. Like a mutual fund or a closed-end fund, ETFs are only an investment vehicle—a wrapper for their underlying investment. So if you buy an S&P 500 ETF and the S&P 500 goes down 50%, nothing about how cheap, tax efficient, or transparent an ETF is will help you.
Vanguard S&P 500 ETF quote is equal to 378.200 USD at 2023-05-13. Based on our forecasts, a long-term increase is expected, the "VOO" fund price prognosis for 2028-05-03 is 517.757 USD. With a 5-year investment, the revenue is expected to be around +36.9%. Your current $100 investment may be up to $136.9 in 2028.
Average annual returns are accurate as of Sept. 30, 2022. Overall, although the differences are small, VOO has historically outperformed SPY over a variety of measurement periods. ... Performance.
VANGUARD 500 INDEX fund price prediction is an act of determining the future value of VANGUARD 500 shares using few different conventional methods such as EPS estimation, analyst consensus, or fundamental intrinsic valuation. ... VANGUARD 500 after-hype prediction price.
Based on our forecasts, a long-term increase is expected, the "Vanguard 500 Index Admiral" fund price prognosis for 2028-04-19 is 562.103 USD. With a 5-year investment, the revenue is expected to be around +46.01%. Your current $100 investment may be up to $146.01 in 2028.
The S&P 500 increased 7.5% during the first quarter of 2023. Though it was led by a few big outperformers, more than half of the stocks on the index closed above their end-of-December prices. Here are the top 30 biggest gainers on the index from January 1 to March 31, 2023.
If you like the name-brand recognition of the S&P 500 and want to stick to large-caps, then VOO might be the better option. If you don't mind some mid and small-cap exposure, then VTI could be a good pick. Investors can potentially also use both as tax-loss harvesting pairs.
But without knowing your background, Buffett would almost certainly advise investing in an S&P 500 index fund like VOO. He understands that it's a good long-term bet for most people.
Buffett finally took his own medicine in 2019's final innings, however, buying not one but two S&P 500-tracking exchange-traded funds (ETFs). The first of those is the the Vanguard S&P 500 ETF (VOO (opens in new tab)).
$3,000 for most actively managed funds. Most Vanguard index funds no longer offer Investor Shares to new investors. For the few that do, most have $3,000 minimums.
The Vanguard S&P 500 ETF, in particular, can be a strong choice because of its low fees. Its expense ratio is just 0.03% -- one of the lowest among ETFs -- which could save you thousands of dollars in fees over time. Regardless of where you invest, it's wise to keep a long-term outlook.
Basic Info. S&P 500 1 Year Return is at 0.91%, compared to -9.29% last month and -1.18% last year. This is lower than the long term average of 6.31%. The S&P 500 1 Year Return is the investment return received for a 1 year period, excluding dividends, when holding the S&P 500 index.
Introduction: My name is Stevie Stamm, I am a colorful, sparkling, splendid, vast, open, hilarious, tender 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.
