It’s Time to Buy the Dip

With the market so oversold, it’s finally time to buy the dip. So financial pros have been looking at ETFs that mirror the S&P 500. 

The Vanguard S&P 500 ETF (VOO) is one of them. It’s financial pros’ second-most popular search over the last month behind only the ever-popular SPDR S&P 500 ETF Trust (SPY). 

You might assume that most S&P 500 ETFs are the same.How hard can it be to copy and paste a simple formula?

Let’s find out.

Investors regard the S&P 500 index as the best barometer for the overall stock market. It represents 503 of the largest U.S. companies.

Yep, the S&P 500 has more than 500 names.

VOO invests in stocks in this index. 

Here are the VOO portfolio’s characteristics:

VOO is highly diversified, with exposure to many different sectors. Information technology stocks have the highest weight at 27.3%, followed by stocks in healthcare at 14.1%, consumer discretionary at 11.4%, and financials at 10.8%. 

The top three stocks in VOO represent more than 15% of the ETF’s weighting. They are Apple (AAPL) at 7.2%, Microsoft (MSFT) at 5.8%, and Amazon.com (AMZN) at 3.3%. 

Here’s a breakdown of the top 10 stocks in the portfolio:

Large-cap tech makes up a huge portion of the index, which is why investors look to Apple, Amazon, and the like as proxies for the overall market.

VOO has been around since September 2010. If you invested $10,000 in the ETF five years ago, it would’ve returned 55.4%, or $5,540 in profits. Ten years ago, an investment of the same amount would’ve given you  a return of 201.7%, or $20,170 in profits. 

VOO Price over the Last 10 Years

Trading VOO

VOO trades approximately 4.4 million shares daily. It has options, which allow traders many different ways to play it. VOO costs over $336 per share, which might keep out traders with small accounts. 

Investing in VOO

VOO charges an ultra-low expense fee of 0.03%. In addition, it pays investors an annual dividend of $5.81, a yield of 1.73%.

Alternatives to VOO

Because the S&P 500 is the stock market’s most popular barometer of the overall market, it shouldn’t be surprising that VOO isn’t the only game in town. 

Other choices include the SPDR S&P 500 ETF Trust (SPY), iShares Core S&P 500 ETF (IVV), SPDR Portfolio S&P 500 ETF (SPLG), and Schwab U.S. Large-Cap ETF (SCHX). 

Portfolio Comparison

VOO has a similar portfolio composition to SPY, IVV, and SPLG.

SCHX covers a different index and has more than 760 stocks in its portfolio. However, the top 10 stocks are similar to VOO’s. 

Fee Comparison

All the ETFs charge an expense ratio of 0.03% except for SPY, which charges an expense ratio of 0.0945%.

Some brokers, such as Fidelity, offer special mutual funds that cover the S&P 500 and charge just 0.015% in expenses.

Dividend Comparison

Dividend yields are 1.73% for VOO, 1.68% for IVV, 1.69% for SPY, 1.76% for SPLG, and 2.11% for SCHX. 

Performance Comparison 

Over the last five years, VOO has returned 55.4%, SCHX 45.2%, SPY 45.4%, SPLG 46.2%, and IVV 55.3%. 

Price Comparison

SCHX and SPLG are more affordable for investors with small accounts, as their share prices are approximately $43 each.  

Our Opinion 10/10

VOO is a great ETF from Vanguard, a great ETF company. 

You simply can’t go wrong with low-cost ETFs. 

If you’re a multiyear, long-term investor, check with your broker for similar mutual funds with even lower fees.