There are countless investment strategies and approaches one can take. What works for one person may not work for another, so it's important to try different effective strategies.
That said, some investments have stood the test of time and proven effective for all types of investors. One of those investments is S&P500 An exchange-traded fund (ETF) that owns the stocks of all 500 stocks included in the index. One of the best S&P 500 ETFs and one I would recommend to any investor. Vanguard S&P 500 ETF (NYSEMKT: VOO).
A bet on the S&P 500 is a bet on the US economy
of S&P500 is an index that tracks the 500 largest stocks traded on the U.S. stock market. Includes many industry leaders; Excellent company, some of the most influential companies in the world. This is primarily why investing in the S&P 500 is similar to investing in the broader U.S. economy.
As an investor, there is no safer long-term bet than a bet on the U.S. economy. Although there have been periods of hiccups and stagnation, the U.S. economy has shown resilience over the long term.
The Vanguard S&P 500 ETF stock covers a lot of ground. The ETF includes companies from all 11 major sectors.
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information technology: 28.9% of shares held
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Finance: 12.9%
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health care: 12.6%
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Consumer discretion: 10.9%
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industry: 8.8%
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Communication services: 8.6%
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Daily necessities: 6.2%
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energy: 3.9%
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real estate: 2.5%
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material: 2.4%
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utility: 2.3%
The ETF's holdings are weighted by market capitalization, so mega-cap tech stocks take the lead, but it still does a good job of gathering representation from across the business spectrum. The top 7 ETFs are “Magnificent Seven“Tech stocks accounted for almost 28% of the fund. These stocks performed extremely well in 2023, powering the overall market and having a significant impact on this ETF.”
Don't underestimate the power of low-cost ETFs
S&P 500 ETFs reflect the same index, so there is no discernible difference other than cost. Vanguard S&P 500 ETF expense ratio At 0.03%, it is one of the lowest among ETFs on the market. Another popular S&P 500 ETF, SPDR S&P 500 ETF Trust, the expense ratio is 0.0945%. Cathie Wood's flagship fund Ark Innovation ETF ~ Making “disruptive innovation” an “investment theme” ~ The expense ratio is 0.75%.
These differences may seem small on paper, but over time they can reach significant amounts. For perspective, let's imagine you invest $500 each month in an ETF that has an average annual return of 10%. Here's how investment value varies based on expense ratio and investment years.
|
Investment years |
Investment value with expense ratio of 0.03% |
Investment value with an expense ratio of 0.0945% |
Investment value with an expense ratio of 0.75% |
|---|---|---|---|
|
Ten |
$95,500 |
$95,200 |
$92,300 |
|
20 |
$342,500 |
$340,000 |
$315,700 |
|
30 |
$981,400 |
$969,500 |
$857,000 |
Calculations by the author. Values are rounded to the nearest hundred.
Proven results that help investors build wealth
There is wide and diverse You tick off one of your key investment boxes, but it doesn't mean much if you don't get the results you deserve. Many broadly diverse ETFs have posted lackluster returns over the years. But the Vanguard S&P 500 ETF shows that it can be a wealth-building investment.
Since its inception in September 2010, the ETF has averaged an annual return of approximately 12% and an annualized return of 14%. total return. Although past results are no guarantee of future performance, an investor who invests $500 per month ($6,000 annually) in the ETF, before fees, assuming the ETF will return an average of 11% per year going forward. The net profit will be:
|
Investment years |
End value |
|---|---|
|
Ten |
$100,200 |
|
15 |
$205,900 |
|
20 |
$383,900 |
|
twenty five |
$683,400 |
|
30 |
$1.18 million |
Calculations by the author. Values are rounded to the nearest hundred.
While the S&P 500 probably won't double in value in one year, as we've seen with some individual stocks, the Vanguard S&P 500 ETF could be a great tool for building lifelong wealth. was (and still is).
Even a small amount of money consistently invested in the Vanguard S&P 500 can pay off big in the future.
Should I invest $1,000 in the Vanguard S&P 500 ETF right now?
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Stephon Walters has a position in the Vanguard S&P 500 ETF. The Motley Fool owns a position in and recommends the Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
If there's one must-have investment in your portfolio, it's this ETF.Originally published by The Motley Fool
