LemonTrades
TL;DR
- For most long-term investors, yes: VOO owns the whole S&P 500 for 0.03% a year ($3 per $10,000), and most professional fund managers fail to beat that index.
- The S&P 500 has returned about 10% a year over the long run, with dividends, but it has also fallen by half, twice this century.
- Today’s risks: a handful of giant tech stocks make up a big share of the index, and valuations are high.
- LemonTrades tells you what moved the S&P 500, and why, as it happens, so a drop never comes without an explanation.
VOO is one of the largest ETFs in the world and a favorite of buy-and-hold investors. Here’s what makes it good, and when it might not be the right choice.
What VOO is
VOO is an exchange-traded fund that holds the stocks in the S&P 500, about 500 of the biggest US companies, in proportion to their size. It launched in September 2010, trades like a stock, and pays out the dividends it collects every quarter.
The case for VOO
- The cost: an expense ratio of 0.03%, among the lowest of any fund. SPY, the oldest S&P 500 ETF, charges 0.0945%.
- Beating the pros: S&P’s SPIVA reports find most actively managed large-company funds trail the S&P 500 over 10 and 15 years.
- Diversification: one fund, hundreds of companies, every major industry.
- The record: the S&P 500 has returned about 10% a year over the long run with dividends reinvested, though never smoothly.
- Tax efficiency: ETFs like VOO rarely pay out taxable capital gains.
What steady investing can add up to
| $10,000 invested | At 7% a year | At 10% a year |
|---|---|---|
| After 10 years | $19,672 | $25,937 |
| After 20 years | $38,697 | $67,275 |
| After 30 years | $76,123 | $174,494 |
Illustration only, before taxes; real returns vary every year and aren’t guaranteed. Past returns since any date: see gold vs the S&P 500.
The case against, or the risks
- Big drops happen: the S&P 500 fell about 57% from 2007 to 2009, 34% in early 2020 and 25% in 2022. You need to be able to wait them out.
- Concentration: the index is weighted by size, so a few giants like Nvidia, Microsoft and Apple make up a large share. See the megacaps live.
- Valuations: US stocks are expensive against company profits and the economy. See the Buffett indicator.
- Only big US companies: no small companies, no international stocks, no bonds.
Who VOO suits
VOO fits investors with a long horizon (five years or more) who want the US market at almost no cost. It’s less suited to money you’ll need soon, or as your only holding if you want international stocks or bonds too. Where the S&P 500 could end this year: see the S&P 500 2026 market prediction.
Sources
Education, not financial advice. VOO is an example, not a recommendation. See our disclaimer.
