One ETF has taken in more money than others so far in 2023, with a whopping $11.3 billion in inflows as of June 6, according to FactSet. But it’s not a new AI fund or ETF taking advantage of other hot tech trends, though it will give you some exposure to them. Alternatively, it’s arguably one of the more boring vanilla ETFs out there, but that doesn’t mean it can’t help you grow your portfolio. it’s the Vanguard S&P 500 ETF (NYSEARCA: VOO). In fact, whether you are just starting your investing journey or if you are already a seasoned trader who has spent years in the investment game, these humble but huge ETFs can be a sound building block for your portfolio. Here’s why.
Harness the power of the entire S&P 500 index in your portfolio
vanguard Standard & Poor’s 500 The ETF has more than $300 billion in assets under management (AUM), making it the third largest ETF in the market today. While there are many complex investment strategies and products that claim to offer investors an edge in the market, VOO keeps it simple. He invests in the S&P 500, the index that is made up of about 500 of the 500 largest US stocks and is arguably the most important and influential index in the investment world.
The S&P 500 covers all sectors of the American economy, so rather than having to bet on individual sectors, an ETF like VOO gives you exposure to them all – from technology leaders like Apple and Microsoft to old economic industry giants like Caterpillar and Deere and everything in between.
The great thing about VOO is that it allows investors to harness the power and innovation of a large sector of the American economy into a single investment vehicle without having to pick preferred sectors or stocks. Investing in VOO is essentially a bet on about 500 of the largest publicly traded companies in the US that continue to innovate and profit over time, which has historically been a winning proposition.
Below, you’ll find an overview Top 10 collectibles from VOOcreated with the TipRanks holdings tool.
Since it tracks the S&P 500 itself, the fund is extraordinarily diversified, owning 504 stocks, and the top 10 making up just 27.8% of assets. As you can see, Apple accounts for the top spot with 7.2% of the fund, followed by Microsoft, which has a weighting of 6.6%, while Amazon, Nvidia and Alphabet (Class A) round out the top five. However, it is not just technology stocks, Warren BuffettBerkshire Hathaway and energy giant ExxonMobil follow closely behind.
As you can see in the table, VOO’s holdings have a very strong set of assets smart scores. In fact, four of its top 10 holdings, Apple, Nvidia, Alphabet and UnitedHealth Group, feature ‘Perfect 10’ Smart Scores. Smart Score is a proprietary quantitative inventory scoring system created by TipRanks. It gives stocks a score from 1 to 10 based on eight key market factors. A score of 8 or higher is equivalent to an Outperform rating, and VOO itself has a strong Smart ETF score of 8 out of 10.
Are VOO Shares A Buy, According To Analysts?
So quantitative factors rate VOO positively, but what do Wall Street analysts think? VOO has a Moderate Buy consensus rating on TipRanks based on analyst ratings, and VOO’s average target stock price From $445.50 it indicates an upside potential of 11.9%. Of the 6,212 analyst ratings by name, 59.13% are Buys, 35.33% are Holds and only 5.54% are Sell.
Investor-friendly fees
In addition to this broad diversification and wide exposure, another attractive feature of VOO is its low expense ratio. VOO’s minuscule expense ratio of just 0.03% is hard to beat. An investor who puts $10,000 into a VOO will only pay $3 in fees the first year. This type of investor-friendly expense structure helps investors defend the capital of their portfolios over time without making a lot of fees. For example, assuming that these fees remain constant and that the fund returns 5% annually over the next 10 years, the investor would only pay $39 in fees over the course of the decade. Compare this to many market ETFs with expense ratios of 0.75%, where investors pay $75 in fees to invest $10,000 in just one year, and you really see the value proposition of an index ETF like VOO.
Strong performance in the long run
With such diversification and an investor-friendly expense ratio, it’s easy to see why these massive ETFs are the most popular ETFs by inflows so far this year. However, there is another factor that has led to its popularity – its long-term track record. VOO has consistently produced double-digit annual total returns for its long-term investors. No matter what time horizon you’re looking for, VOO has it delivered. As of the end of May, VOO had a total annual return of 12.8% over a three-year time frame. Over a five-year time period, the massive ETF generated total returns of 11% annually. Moreover, over the past 10 years, VOO has returned 11.9% annually. VOO has been around since 2010, and since its inception that year, it has returned 13.3% year over year.
Keeping things simple can pay off
It never hurts to keep it simple. Although there are plenty of exotic investment strategies out there, few have outperformed an ETF like VOO over the long term. While this S&P 500 ETF isn’t the kind of investment that will give you a multi-portfolio return in a year, the truth is that few investments are. However, the good news is that investing in a large-scale ETF like this and letting those gains accumulate over the years is a time-tested method for building long-term wealth. Investors can average dollar cost over time when they have excess cash and/or when the S&P 500 is down while reinvesting dividends to magnify these results even further.
VOO’s solid track record, investor-friendly expense ratio, and portfolio that includes nearly 500 of the largest U.S. stocks has made it a longtime winner, and it’s likely to remain a winner for the foreseeable future.
