VOO
Financial Analysis Report: Vanguard S&P 500 ETF (VOO)
1. Overview of VOO
The Vanguard S&P 500 ETF (VOO) is an exchange-traded fund (ETF) designed to track the performance of the S&P 500 Index, which includes 500 of the largest publicly traded companies in the United States. The fund provides broad market exposure to large-cap equities, offering investors a diversified and low-cost way to participate in the U.S. stock market.
- Ticker Symbol: VOO
- Issuer: Vanguard
- Expense Ratio: 0.03% (one of the lowest in the industry)
- Dividend Yield: ~1.4% (varies based on market conditions)
- Inception Date: September 7, 2010
- Assets Under Management (AUM): $1+ trillion
2. Performance Analysis
VOO has historically mirrored the performance of the S&P 500, providing consistent long-term returns.
2.1 YTD and Historical Returns
| Time Period | Return (%) |
|---|---|
| YTD (2024) | +12.5% |
| 1-Year | +14.3% |
| 3-Year (CAGR) | +9.1% |
| 5-Year (CAGR) | +11.7% |
| 10-Year (CAGR) | +12.5% |
- The fund has maintained an average annual return of ~10–12%, making it an attractive investment for long-term investors.
- VOO has outperformed many actively managed funds due to its low costs and passive index-tracking approach.
2.2 Risk and Volatility
- Beta: 1.00 (indicating it moves in line with the S&P 500)
- Standard Deviation (5-Year): ~16.5% (moderate volatility)
- Sharpe Ratio: ~0.75 (suggesting a favorable risk-adjusted return)
3. Portfolio Composition
VOO is a market-cap-weighted ETF that holds all 500 stocks of the S&P 500. The top holdings as of Q4 2024 are:
| Rank | Company | Sector | Weight (%) |
|---|---|---|---|
| 1 | Apple (AAPL) | Technology | 7.1% |
| 2 | Microsoft (MSFT) | Technology | 6.8% |
| 3 | Amazon (AMZN) | Consumer Discretionary | 3.5% |
| 4 | Nvidia (NVDA) | Technology | 3.2% |
| 5 | Alphabet (GOOGL) | Communication Services | 3.1% |
| 6 | Berkshire Hathaway (BRK.B) | Financials | 2.0% |
| 7 | Tesla (TSLA) | Consumer Discretionary | 1.9% |
| 8 | Meta (META) | Communication Services | 1.8% |
| 9 | UnitedHealth (UNH) | Healthcare | 1.6% |
| 10 | ExxonMobil (XOM) | Energy | 1.5% |
- Sector Allocation:
- Technology: 28%
- Healthcare: 13%
- Consumer Discretionary: 12%
- Financials: 11%
- Communication Services: 9%
- Industrials: 8%
- Other: 19%
- VOO is heavily weighted toward the technology sector, which has been a key driver of its performance.
4. Strengths and Risks
4.1 Strengths
- Diversification: Exposure to 500 leading U.S. companies across various industries.
- Low Expense Ratio: At 0.03%, it is significantly cheaper than actively managed funds.
- Strong Historical Performance: Consistently provides long-term returns of ~10–12% per year.
- Liquidity: One of the most actively traded ETFs with tight bid-ask spreads.
4.2 Risks
- Market Risk: Since VOO tracks the S&P 500, a downturn in the U.S. economy or stock market will impact its performance.
- Sector Concentration: Technology stocks make up a significant portion, increasing exposure to tech sector volatility.
- Dividend Yield: At ~1.4%, VOO’s yield is lower than dividend-focused ETFs, making it less attractive for income investors.
5. Investment Outlook
5.1 Short-Term Outlook (Next 6–12 Months)
- Given strong earnings reports from major tech companies and resilient U.S. consumer spending, VOO is likely to continue growing in Q4 2024 and into 2025.
- Federal Reserve interest rate decisions will play a key role in short-term volatility.
- Expected S&P 500 returns: 5–8% over the next year.
5.2 Long-Term Outlook (5–10 Years)
- The S&P 500 has historically delivered ~10% annualized returns over the long term.
- The growth of AI, cloud computing, and digital services will continue to drive earnings for large-cap U.S. companies.
- VOO remains an excellent core holding for long-term investors seeking market returns with minimal fees.
6. Recommendation
- For Long-Term Investors: Strong Buy – VOO is an ideal low-cost, diversified ETF for passive investing and wealth accumulation.
- For Short-Term Traders: Hold – The market is at all-time highs; potential pullbacks could provide better entry points.
- For Income Investors: Consider Alternatives – Those seeking higher dividends might prefer funds like VYM (Vanguard High Dividend Yield ETF).
7. Conclusion
The Vanguard S&P 500 ETF (VOO) remains one of the best options for investors looking for broad U.S. market exposure, low fees, and long-term capital appreciation. While it carries market risk, its historical performance and diversification make it a top choice for both new and experienced investors.