If you want to choose an ETF to have a steady growth, or you just want to earn an average market return without too much turmoil, then VOO must be your good choice.
However, if you are new to investing, you may want to know more about it.
Here, I will introduce it in more detail, including its composites and performance. Finally, I will share with you 5 reasons why you should invest in it.
What is VOO？
VOO is the abbreviation of Vanguard S&P 500 ETF, which was issued by Vanguard in 2010.
It copies and traces full S&P 500’s composition and performance.
S&P 500 is the index that traces the top 500 companies with highest market value, calculates their weights and a single value for it。
What are its compostion？
Its composition is all the same as S&P 500.
From industrial perspective, until Jan. 31, 2024, the composition is as below（data from VOO，same foe below）：
| Industrial | Weights |
| Information Technology | 29.50% |
| Financials | 13.10% |
| Health Care | 12.80% |
| Consumer Discretionary | 10.30% |
| Communication Services | 8.90% |
| Industrials | 8.60% |
| Consumer Staples | 6.10% |
| Energy | 3.80% |
| Real Estate | 2.40% |
| Materials | 2.30% |
| Utilities | 2.20% |
And, as of Jan. 31, 2024, the top 10 holdings are as below：
| Stocks | Weights |
| Microsoft | 7.23% |
| Apple | 6.60% |
| Nvidia | 3.72% |
| Amazon | 3.45% |
| Facebook – Class A | 2.12% |
| Google – Class A | 2.03% |
| Google – Class C | 1.73% |
| Berkshire Hathaway- Class B | 1.71% |
| Tesla | 1.27% |
| Broadcom | 1.27% |
How does it charges？
The current expense ratio is 0.03%.
How does it performs？
Until Jan. 31, 2024, its performance is as following：
| YTD | 1-year | 3-year | 5-year | 10-year | Since inception |
| 1.60% | 20.77% | 10.97% | 14.24% | 12.57% | 13.91% |
5 Reasons that you should invest in VOO
As for why you should invest in this ETF, here are the reasons:
You can enjoy the market average return without spending much effort.
You don’t need to spend too much time and effort researching and analyzing, just buy and hold it, the average return is yours.
Many researches and reports have confirmed, just holding the S&P 500 index, you can win 80% of funds on the performance. For those funds have outperformed S&P 500, in the next several years, they are suppressed by S&P 500 eventually.
In other words, you cannot win S&P 500 forever.
So, you don’t have to take a lot of time and effort to research and analyze individual stock, funds and strategy, just buy VOO, it can save you time, and provide you the return that wins 80% of people.
In fact, the annual market returns, which is 10% above for the long-run, is quite attractive. Who can provide such great yield over 10 years?
The risk is not over centralized on single industry
Per table just show, the risk in it has been distributed to all the industrials, not focused on a single one.
Even Information tech companies, like Apple and Microsoft, are the main drivers for VOO performance, their overall weight is just 29.5%, meaning they are not the only dominant of the ETF.
Moreover, if one industry or composite doesn’t perform well, there are still players to hold the ETF performance, making the price walk stable.
You can hold it very, very long without worries
The biggest merit is that you can hold it over 10 years, 20 years, or even over 50 years, and you don’t have to worry about it.
One trait of the index is that it can last forever, as the country issued doesn’t extinguish. So the related ETFs, like VOO, can also last a very long time.
Of course you can say the fund company may also go bankrupt, that is true. But honestly, the company, Vanguard, has been supervised by US authority, and had many regulations and protection mechanisms on it, so the possibility of its falling is very minor.
The composites have strong ability to control their tremendous profit
The top stocks in the composites, like Apple, Microsoft, Nvidia, Amazon, Google, are having the strong ability to control their own profit, and even in their own industries.
The latest and obvious case is Nvidia, an AI chips front runner. Per its Q4’24 financial result (or see below), the gross profit has reached 76%, meaning that when they sell their product, only 24% of price can be earned by their supplier, 76% is taken by Nvidia itself.
As the gross margin goes higher, the greater ability for a company to control their own profit.
So owing VOO, you don’t have to worry about these companies having a sudden profit shrink. If it does happen, other companies with stronger ability will substitute them.
The long-term economic trend is upward, and provides room to continue price-up.
The indexes are the reflection of a country’s economy.
If you take a maximum view of S&P 500 (1927~2024), you can see its trend is upward, like the following chart from Yahoo!Finance:
Over 97 years, it experienced several crises and recession, and had at 30% loss each time. Nevertheless, these losses still could be recovered in a few months or years, and continued to go up. Until now, these stories still happen, so as in the future.
Hence, it can provide more room for VOO to continue pricing up, as the economy is still developing , and more profits are created.