Is it smart to invest in VOO?
Summary. Investing in the S&P 500 index fund, such as VOO, is a winning long-term strategy. Historical data shows that the market has consistently gone higher despite obstacles and downturns.
Vanguard S&P 500 ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VOO is a great option for investors seeking exposure to the Style Box - Large Cap Blend segment of the market.
If you want to own only the biggest and safest stocks, choose VOO. If you want more diversification and exposure to mid-caps and small-caps, choose VTI. If you can't decide, consider simply buying both of them (assuming that commissions are low or free).
VOO 12 Months Forecast
Based on 505 Wall Street analysts offering 12 month price targets to VOO holdings in the last 3 months. The average price target is $517.35 with a high forecast of $620.23 and a low forecast of $423.31. The average price target represents a 9.74% change from the last price of $471.43.
In 1980, had you invested a mere $1,000 in what went on to become the top-performing stock of S&P 500 (^GSPC -0.65%), then you would be sitting on a cool $1.2 million today. That equates to a total return of 120,936%. The stock? None other than Gap (GPS 8.23%).
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.
VOO and VTI are both solid options for a 100% US-based index fund, with low expense ratios and returns that track market returns. The main difference between VOO and VTI is the number of holdings, with VOO following the S&P 500 and VTI holding virtually every publicly traded company in the US.
VOO has a dividend yield of 1.36% and paid $6.36 per share in the past year. The dividend is paid every three months and the last ex-dividend date was Dec 20, 2023.
Vanguard S&P 500 ETF (VOO) and Vanguard Total Stock Market ETF (VTI) have volatilities of 3.97% and 4.10%, respectively, indicating that both stocks experience similar levels of price fluctuations. This suggests that the risk associated with both stocks, as measured by volatility, is nearly the same.
VOO is also notable for its low cost. With an expense ratio of just 0.03%, it costs only $3 per year for every $10,000 invested. This low fee structure is a significant advantage, as high fees can erode investment returns over time. Investing in VOO can be as simple as buying and holding.
What is the 10 year return on VOO vs VTI?
Over the past 10 years, VTI has underperformed VOO with an annualized return of 11.97%, while VOO has yielded a comparatively higher 12.66% annualized return. The chart below displays the growth of a $10,000 investment in both assets, with all prices adjusted for splits and dividends.
VOO 1 Year Total Returns (Daily): 27.57% for March 5, 2024.
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.
When comparing these two ETFs, we come up with the following: VOO is a value-based index. VOOG is a growth-based index.
A $1000 investment made in November 2013 would be worth $5,574.88, or a gain of 457.49%, as of November 16, 2023, according to our calculations. This return excludes dividends but includes price appreciation. Compare this to the S&P 500's rally of 150.41% and gold's return of 46.17% over the same time frame.
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.
For instance, say your investments are earning a 12% average annual return compared to 10% per year. If you're still investing $100 per month, you'd have a total of around $518,000 after 35 years, compared to $325,000 in that time period with a 10% return.
If the S&P 500 outperforms its historical average and generates, say, a 12% annual return, you would reach $1 million in 26 years by investing $500 a month.
Here's how a 10.25% return would break down if you invested $5,000 at the beginning of each year over four decades. Data source: Author's calculations. As you can see from the chart, investing $5,000 annually in the S&P 500 would make you a millionaire in a little over 30 years, assuming average 10.25% annual returns.
If you invested $500 a month for 10 years and earned a 4% rate of return, you'd have $73,625 today. If you invested $500 a month for 10 years and earned a 6% rate of return, you'd have $81,940 today. If you invested $500 a month for 10 years and earned an 8% rate of return, you'd have $91,473 today.
Is it better to buy VOO or VTI?
VTI is better diversified and benefits from small and mid-cap stocks that grow into large caps. VOO is less diversified, tracking the performance of the S&P 500 Index. VOO excludes small and mid-cap stocks.
VOO will offer consistent returns with diversification and lower costs. QQQ will offer you the opportunity to bring in higher returns, but these come with more risks and a higher cost. If you're looking for the best return possible on your money, then you're going to want to go with QQQ.
QQQ - Performance Comparison. In the year-to-date period, VOO achieves a 7.93% return, which is significantly lower than QQQ's 8.81% return. Over the past 10 years, VOO has underperformed QQQ with an annualized return of 12.70%, while QQQ has yielded a comparatively higher 18.26% annualized return.
There are typically 4 dividends per year (excluding specials), and the dividend cover is approximately 1.0.
The most volatile stock ETF, Direxion Daily Gold Miners Bear 3x ETF (DUST), has a three-year standard deviation of 125.45 and a three-year average annual return of -44.36%. Naturally, if you look hard enough, you can find stocks with higher risk ratings than members of the blue-chip S&P 500.
