Vanguard S&P 500 funds offer well-diversified, market-cap-weighted portfolios of 500 of the largest U.S. stocks. The funds accurately represent the large-cap opportunity set while charging rock-bottom fees, a recipe for success over the long run. 

The funds track the flagship S&P 500, which selects 500 of the largest U.S. stocks—roughly 80% of the U.S. equity market—and weights them by market cap. An index committee has discretion over selecting companies that meet certain liquidity and profitability standards. While a committee-based approach may lack clarity, it adds flexibility to reduce unnecessary changes during reconstitution, taming transaction costs compared with more-rigid rules-based indexes.

The end portfolio is well-diversified and accurately resembles the U.S. large-cap opportunity set. This allows the strategy to capitalize on its low fee, ultimately delivering sound long-term performance on both an absolute and risk-adjusted basis. 

The bedrock of this strategy is market-cap weighting, which harnesses the market’s collective wisdom of the relative value of each holding with the added benefit of low turnover and associated trading costs. It’s a sensible approach because the market tends to do a good job pricing large-cap stocks. The companies in this portfolio attract liquidity and widespread investor attention, such that prices reflect new information quickly.  

However, when few richly valued companies or sectors power most of the market gains, market-cap weighting may expose the strategy to stock- or sector-level concentration risk, as is the case at year-end 2023. As of November 2023, the top 10 holdings made up the largest portion of the index (31%) in several decades and the 30% allocation to technology stocks was the highest since the dot-com bubble. But this is not a fault in design: The S&P 500 simply reflects the market composition. In the long run, its broad diversification, low turnover, and a low fee outweigh these risks.

Analyst Rating

Best-In-Class Option For Large-Cap Investors

Associate Analyst

Mo'ath Almahasneh

Microsoft

Apple

NVIDIA

Amazon

Alphabet

Berkshire Hathaway Inc. - Ordinary Shares - Class B

Eli Lilly

Broadcom

This strategy accurately captures the large-cap opportunity set and it keeps a lid on turnover by leveraging the market’s collective wisdom to size its positions. It earns a High Process Pillar rating. 

The strategy fully replicates the S&P 500, which selects the 500 of the largest U.S. companies that pass its liquidity and profitability screens. The profitability screen requires that the sum of a company’s GAAP earnings over the past four quarters be positive as well as the most recent quarter. The screen imparts a slight quality tilt to the portfolio but has a limited impact relative to other large-cap benchmarks since large-cap stocks tend to be profitable. There have been instances where the profitability screen prevented otherwise qualified companies from index inclusion. Most notably, Tesla was added to the index only in December 2020, despite passing the liquidity and market-cap thresholds in January 2013. Once the index committee selects stocks, it weights them by market cap.

Market-cap weighting harnesses the market’s collective wisdom on a stock’s relative value and helps reduce turnover and associated trading costs. The index committee further curbs turnover by implementing changes as it sees fit rather than adhering to a strict reconstitution schedule.

High

Process

The portfolio managers on these funds are part of Vanguard’s equity index group. This global team has topnotch resources and technology that support tight tracking of the fund’s target index. They earn an Above Average People Pillar rating.

The European and North American teams are integrated and use the same processes and systems. This ensures broad knowledge globally and provides continuity in contingency scenarios. 

Michelle Louie, Aaron Choi, and Nicholas Birkett share responsibility for the U.S. funds, except for Vanguard Institutional Index, which Choi does not manage. Louie has been with the firm since 2010 and has managed portfolios since 2014. Choi and Birkett have worked in investment management at Vanguard since 2015 and 2016, respectively. 

Ryan Ludt oversees the European-domiciled funds. He is head of the European equity index group and is responsible for overseeing the daily management of all domestic, global equity, and listed property securities portfolios and ETFs.

Michael Perre oversees the Canadian-domiciled funds. Perre is a principal at Vanguard and has managed investment portfolios since 1999. 

Portfolio managers not only oversee the portfolio but also execute trades on a day-to-day basis. Vanguard typically rotates portfolio managers around from one fund to another every few years to improve their breadth and depth of expertise. They also have access to Vanguard’s global trading desks, enabling them to make the most cost-efficient transactions in various global markets.

Vanguard’s portfolio managers are compensated with a bonus that factors in the gross, pretax performance of the fund relative to its objectives. This includes the manager’s record of tracking a benchmark index over the prior 12 months. These characteristics align the interests of the managers and investors.

Above Average

People

As The Vanguard Group settles on new senior leadership, it retains a High Parent rating.

Vanguard announced current CEO Tim Buckley will step down by the end of the year, marking an end to his 33 years at the firm. Historically, Vanguard has pronounced CEO retirements while simultaneously signaling who (from inside the firm) would take over. In this instance, Vanguard’s board said it will evaluate internal and external candidates in the coming months to find its next, and fifth, leader, though it also promoted CIO Greg Davis to president.

Vanguard flourished in several respects under Buckley’s leadership. Assets under management have grown by two thirds over his six years at the helm, while its asset-weighted average US fund fee ratcheted lower to 0.08% at the end of 2023. Vanguard further refined its advice business through its low-cost Digital Advisor platform and more holistic Vanguard Personal Advisor Services, and it debuted promising investment options.

Vanguard has had its share of challenges under Buckley, too. Growing its business outside the US has proved difficult, and ex US investors account for less than 10% of AUM. Between 2019 and 2023, Vanguard’s efforts to build its China business underwent dramatic shifts, with the firm ultimately abandoning plans to launch low-cost index funds there. It also ended a partnership with Ant Financial to provide advisory services to retail investors. Inside the US, customer service issues have continued to be a problem, and some of Vanguard’s newer offers, such as margin loans, seem a departure from a more-conservative approach to investing.

Vanguard retains an investor-friendly culture at its core that’s burnished by a commitment to low costs and supported by its unique mutual ownership structure and direct-to-investor playbook.

Parent

Vanguard S&P 500 ETF

VOO tracks a market-cap-weighted index of US large- and mid-cap stocks selected by the S&P Committee.

The fund is passively managed to hold large-cap US stocks selected by an S&P Committee.

Fidelity NASDAQ Composite Index

Downturns are a great time for patient investors to put money into the stock market.

2 Perfect Index Funds to Buy in an S&P 500 and Nasdaq Bear Market

ProShares Ultra QQQ

Invesco QQQ

Direxion Daily Semiconductor Bull 3x Shares

iShares PHLX Semiconductor ETF

Direxion Daily S&P 500 Bull 3x Shares

ProShares UltraPro Short S&P500

SPDR S&P 500 ETF Trust

ProShares UltraPro Short QQQ

ProShares Ultra S&P 500

Direxion Daily Small Cap Bull 3x Shares

ProShares UltraPro QQQ

ProShares UltraPro S&P500

LETF Decay costs have plateaued and are now on a downward trend. LETF decay costs bite hard in sideways and Bear markets.

October 2022 Leveraged ETF Decay Update: A Story In Charts

JPMorgan Equity Premium Income ETF

VOO is a simple S&P 500 index ETF, with strong realized and potential capital gains, and an outstanding performance track-record. JEPI is a popular equity income ETF, with a strong dividend yield, and an outstanding performance track-record.

VOO Vs. JEPI: Which ETF Is The Better Dividend Investment

The S&P 500 remains supported along its June lows, as buyers appeared to stanch further selling. However, the price action has not been resolved. We anticipate that the market has already priced in a mild-to-moderate recession. But, we explain why the Fed may not be finished with its rate hikes.

S&P 500: Yes, Be Careful But Don't Be Too Pessimistic At These Levels

iShares Core U.S. Aggregate Bond ETF

Caribou Biosciences

iShares iBoxx High Yield Corporate Bond ETF

iShares Core S&P 500 ETF

iShares Russell 1000 ETF

iShares iBoxx $ Investment Grade Corporate Bond ETF

iShares National Muni Bond ETF

Vanguard FTSE Developed Markets ETF

Vanguard Tax-Exempt Bond Index ETF

Trading activity on the Tradeweb European ETF marketplace amounted to EUR 49.7 billion in September. Total consolidated U.S. ETF notional value traded in September 2022 reached USD 51 billion.

Tradeweb Exchange-Traded Funds Update - September 2022

After a rough performance in the first nine months of 2022, investors are hoping for things to turn around.

Is the S&P 500 Ready for a 4th-Quarter Bull Run?

It's easier than you may think to make a lot of money in the stock market.

Investing in This ETF Right Now Could Make You a Millionaire Retiree

Stock prices may be falling, but there are ways to protect your money.

Nervous About a Bear Market? 1 ETF That Can Keep Your Investments Safe

SPDR Dow Jones Industrial Average ETF

iShares Russell 2000 ETF

Vanguard Total Stock Market ETF

The spread of the U.S. dollar throughout the world is now coming back to disrupt the American economy and the Fed's efforts to fight inflation. Sooner or later, the Federal Reserve, and others, are going to have to accept the fact that the world is a global enterprise, especially when it comes to money and finance.

The Global Feedback To The Fed's Quantitative Easing

ProShares Short S&P500

SPDR Portfolio S&P 500 High Dividend ETF

SPDR Portfolio S&P 500 Growth ETF

SPDR Portfolio S&P 500 Value ETF

The S&P 500 is off about 21.4% this year. More pain is likely ahead and many analysts are expecting a rebound in the first half of 2023.

S&P 500 ETFs: What Investors Need to Know Right Now

Analog Devices

American Financial Group

Ally Financial

Best Buy

Boston Omaha

Carrier Global

Cogent Communications Holdings

Comcast

CVS Health

Digital Realty Trust

Fidelity National Financial

Corning

General Motors

Graphic Packaging Hld

Global Payments

Home Depot

Lockheed Martin

Medical Properties Trust

Realty Income Corp

Starbucks

STORE Capital

T. Rowe Price Group

UnitedHealth Group

Union Pacific

Visa

Vici Properties

Watsco

September was a massive month for my dividend income growth due to a combination of factors including reduced stock prices and additional allocated capital during the month. Forward dividend income grew by $248.94, translating to M/M growth of 6.57%.

Dividend Growth Investment Income - September 2022 Update

Is it still safe to invest right now? Here's what you need to know.

S&P 500 Bear Market: How to Protect Your Investments

SPDR Bloomberg 1-3 Month T-Bill ETF

Last week, ETFs pulled in $13.8 billion in capital, pushing year-to-date inflows to $425 billion.

5 Most-Loved ETFs at the Onset of Q4

These index funds could help patient investors gain a fortune in the stock market.

2 Magnificent Index Funds That Could Make You a Stock Market Millionaire

The equity puts to calls ratio has not yet reached the extreme ratios registered at past bear markets. This may mean another shoe is reading to drop.

The Equity Puts To Calls Ratio Suggests The Market Decline Is Not Over

This low-cost, diversified fund is building my investment nest egg.

Here's Why 54% of My Portfolio Is in This Top Index Fund

Could a basic S&P 500 index fund really generate 7-figure wealth?

Is the S&P 500 All You Need to Retire a Millionaire?

There are hundreds of excellent ETFs to choose from, but why not invest in the long-term success of American business?

This 1 ETF Is My Top Recommendation for New Investors

Vanguard Total Bond Market ETF

iShares MSCI Emerging Markets ETF

SPDR Gold Trust

iShares U.S. Treasury Bond ETF

iShares Gold Trust

iShares 7-10 Year Treasury Bond ETF

iShares S&P Small-Cap 600 Value ETF

iShares 20+ Year Treasury Bond ETF

S&P 500 and total stock market ETFs amassed maximum assets in the third quarter of 2022.

ETF Asset Report of Third-Quarter 2022

SPDR Bloomberg High Yield Bond ETF

iShares 1-3 Year Treasury Bond ETF

WisdomTree Bloomberg Floating Rate Treasury Fund

Vanguard Short-Term Corporate Bond ETF

Financial Select Sector SPDR Fund

The month of September stuck to its ill-repute as key indexes incurred heavy losses.

ETF Asset Report of September

Vanguard Short-Term Bond ETF

Schwab US TIPS ETF

Invesco S&P 500 Low Volatility ETF

Vanguard Utilities ETF

Vanguard FTSE Emerging Markets ETF

Vanguard Emerging Markets Government Bond ETF

On November 9, 2021, I launched the ETF Reliable Retirement Portfolio. Working from various 2022 investment outlooks as well as other research material, I constructed a 16-ETF portfolio that seeks to balance diversity, growth, and current income.

ETF Reliable Retirement Portfolio-The Quarter Everything Collapsed: 2022 Q3 Update

JPMorgan BetaBuilders Europe ETF

SPDR EURO STOXX 50 ETF

iShares Core MSCI Europe ETF

Vanguard FTSE Europe ETF

iShares Core High Dividend ETF

SPDR Portfolio S&P 500 ETF

Vanguard Value ETF

Vanguard High Dividend Yield ETF

When you see the largest ETF, the SPDR S&P 500 ETF (SPY), down more than 20% year-to-date in late September, and with an industry-leading $23 billion of net outflows you might think investors are pulling back on ETF adoption.

ETF Growth Continues Despite Tough Market

iShares Russell 2000 Growth ETF

Vanguard Dividend Appreciation ETF

Diversification at the click of a button with exchange-traded funds can be the perfect panacea to combat a volatile market.

The 3 Best ETFs to Buy as the Market Plunges

While free cash flow remains at an above-average level on a trailing basis, the decline in the NC 2000's FCF yield is alarming given the macroeconomic headwinds firms are currently facing. The trailing FCF yield for the NC 2000 fell from 1.7% as of 6/30/22 to 1.5% as of 8/12/22.

All Cap Index & Sectors: Free Cash Flow Yield Falls Through 8/12/22

Warren Buffett has often said low-cost index funds are the best option for most investors.

2 Top Index Funds That Could Make Retirees Richer Over the Next Decade

News for Vanguard S&P 500 ETF ETF (VOO)