The S&P 500 is within striking distance of a fresh all-time high. Is now a good time to invest?
The Vanguard S&P 500 ETF (VOO 0.11%) is one of the best ways to invest in the S&P 500, which has been a pretty smart strategy over the long term. Since 1965, the S&P 500 has produced a total return of 10.2% annualized. The Vanguard ETF has an expense ratio of just 0.03%, so you get to keep most of your gains.
While there's no guarantee that the S&P 500 will achieve the same level of performance in the future, it has historically produced 9%-10% annualized returns over most multidecade periods. Having said that, the S&P 500 isn't too far from its all-time high (as of this writing), so it's natural for investors to wonder whether now might be a good time to buy shares in an S&P 500 index fund or if it would be smarter to wait for a better opportunity.
Just under an all-time high
The S&P 500 and several other major stock indices have reached all-time highs this year and remain close to record levels. In the case of the S&P 500, the index is less than 3% below its all-time high, as of April 29.
^SPX data by YCharts.
Should you wait for a correction?
One important thing for all investors to learn is that timing the market is impossible. And quite frankly, it's unimportant if you're investing in a high-quality S&P 500 index fund for the long term. Even if you buy at a market peak, your long-term returns should likely be excellent.
For example, let's say you invested in the S&P 500 at its peak in 2007 -- just before the financial crisis sent the market plunging. By the time the S&P 500 bottomed in early 2009, it had lost about 50%. So this would seem like a pretty awful time to invest.
However, you might be surprised to learn that if you had invested in an S&P 500 index fund at the worst possible time before the 2008-2009 financial crisis, you would be sitting on a 355% total return today. If you look at the chart below, the actual 2008-2009 stock market crash barely looks like a blip over the long run. And that's the point.
^SPXTR data by YCharts.
It's also worth noting that just because the S&P 500 is near an all-time high doesn't mean it can't go even higher. Many people were "waiting for a correction" in the 2014-2015 time frame after a long post-financial crisis rally and never got one.
A better strategy
Having said that, the best way to invest in S&P 500 ETFs is a little at a time, not all at once.
One excellent strategy is to invest equal amounts of money at certain intervals. This is known as dollar-cost averaging, and mathematically, it guarantees that you'll buy more shares when prices are lower and fewer shares when prices are high.
As a basic illustration of this, let's say you plan to invest $1,000 in the Vanguard S&P 500 index fund every three months. Right now, the fund is trading for approximately $470 per share, so assuming your broker allows you to buy fractional shares, you'd buy 2.13 shares of the index fund.
Now let's say that a market correction comes, and the share price of the fund falls to $430 by the time you're ready to make another investment. This time, your $1,000 investment will buy 2.33 shares.
The bottom line is that by averaging into a fund like the Vanguard S&P 500 ETF, you're going to get a favorable average share price over time. A strategy like this is a far better way to invest than trying to decide whether to invest a lump sum now or later.
Matt Frankel has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
FAQs
The S&P 500 is less than 3% away from its all-time high, making some investors hesitant to buy an index fund. There's no way to time a correction, and even if you buy at the highs, you'll likely do fine over the long run. Dollar-cost averaging could be a far better strategy, no matter what the market is doing.
Is Vanguard S&P 500 ETF a good buy? ›
Many investors consider the ETF to be the backbone of their portfolio, and for good reason. The S&P 500 has historically delivered excellent results over long periods, and is generally a worry-free way to invest over the long run.
Is VOO a buy right now? ›
Vanguard S&P 500 ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VOO is an excellent option for investors seeking exposure to the Style Box - Large Cap Blend segment of the market.
What is the outlook for Vanguard S&P 500 ETF? ›
VOO 12 Month Forecast
Based on 504 Wall Street analysts offering 12 month price targets to VOO holdings in the last 3 months. The average price target is $559.99 with a high forecast of $864.36 and a low forecast of $453.94. The average price target represents a 11.60% change from the last price of $501.78.
What is the price prediction for the Vanguard S&P 500 Index Fund? ›
Based on 504 Wall Street analysts offering 12 month price targets to Vanguard 500 Index Fd Admiral Shs holdings in the last 3 months. The average price target is $561.87 with a high forecast of $826.56 and a low forecast of $459.28. The average price target represents a 11.08% change from the last price of $505.83.
How safe is Vanguard S&P 500? ›
Investing in Vanguard's VOO is a low-stress way for investors to access the U.S. equity market; however, there is the risk of loss as with any investment, and investors should consult a financial professional before investing in the Vanguard S&P 500 ETF.
What is the best ETF to buy in Vanguard? ›
10 Best-Performing Vanguard ETFs
| Ticker | Company | Performance (Year) |
|---|
| VOX | Vanguard Communication Services ETF | 32.10% |
| VFMF | Vanguard U.S. Multifactor ETF | 31.04% |
| VOOG | Vanguard S&P 500 Growth ETF | 30.30% |
| VIS | Vanguard Industrials ETF | 30.12% |
6 more rowsMay 31, 2024
Average Price Target
Based on 504 Wall Street analysts offering 12 month price targets to SPY holdings in the last 3 months. The average price target is $605.38 with a high forecast of $951.09 and a low forecast of $489.68. The average price target represents a 11.18% change from the last price of $544.51.
Is it better to buy VTI or VOO? ›
VTI is a total U.S. market fund and holds more than 3,500 stocks. 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.
Are ETFs a good idea right now? ›
But the combination of diversification, price, and the ability to invest in a theme of your choice make ETFs a very popular addition to most investors' portfolios right now.
The Vanguard S&P 500 ETF has a very low minimum investment of $1 if you purchase the ETF directly from Vanguard or through a brokerage account that allows the trading of fractional shares. If your broker doesn't allow trading fractional shares, you'd need to buy at least one share (about $460 in mid-2024).
What is the return rate of the Vanguard S&P 500? ›
Quarterly after-tax returns
| S&P 500 ETF | 1-yr | 10yr |
|---|
| Returns before taxes | 29.83% | 12.91% |
| Returns after taxes on distributions | 29.36% | 12.42% |
| Returns after taxes on distributions and sale of fund shares | 17.91% | 10.66% |
| Average Large Blend Fund | |
3 more rows£-0.52 (-0.63%)
Is Vanguard S&P 500 a good investment? ›
The Vanguard S&P 500 ETF (VOO 0.28%) is one of the best ways to invest in the S&P 500, which has been a pretty smart strategy over the long term. Since 1965, the S&P 500 has produced a total return of 10.2% annualized. The Vanguard ETF has an expense ratio of just 0.03%, so you get to keep most of your gains.
Will VOO go down in 2024? ›
As aforementioned, I'm forecasting VOO to end 2024 with a price of around $428, about 8% below its current price. And let me walk over the rationale behind the table. According to LSEG data, analysts expect overall S&P 500 earnings to rise 9.5% in 2024 compared to 2023.
Is VGT a buy or sell? ›
VGT has a consensus rating of Moderate Buy which is based on 240 buy ratings, 78 hold ratings and 5 sell ratings. What is VGT's price target? The average price target for VGT is $642.36. This is based on 323 Wall Streets Analysts 12-month price targets, issued in the past 3 months.
What is Vanguard SP 500 ETF average return? ›
Vanguard S&P 500 (VOO): Historical Returns
Singletrack Mountain Biking – What Are The Pros And Cons? In the last 30 Years, the Vanguard S&P 500 (VOO) ETF obtained a 10.49% compound annual return, with a 15.14% standard deviation.
Does Vanguard S&P 500 ETF pay dividends? ›
Dividend Summary
There are typically 4 dividends per year (excluding specials), and the dividend cover is approximately 1.0.
Should I invest in ETF or S&P 500? ›
While dividend ETFs can offer stable income, their growth potential is generally lower over the long run. That said, dividend ETFs may outperform the S&P 500 during particular time frames, such as during a recession or a period of easing interest rates.
How many S&P 500 ETFs should I buy? ›
SPY, VOO and IVV are among the most popular S&P 500 ETFs. These three S&P 500 ETFs are quite similar, but may sometimes diverge in terms of costs or daily returns. Investors generally only need one S&P 500 ETF.
