Should Vanguard S&P 500 ETF (VOO) Be on Your Investing Radar?

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Designed to provide broad exposure to the Large Cap Blend segment of the US equity market, the Vanguard S&P 500 ETF (VOO) is a passively managed exchange traded fund launched on 09/09/2010.

The fund is sponsored by Vanguard. It has amassed assets over $259.31 billion, making it one of the largest ETFs attempting to match the Large Cap Blend segment of the US equity market.

Why Large Cap Blend

Companies that find themselves in the large cap category typically have a market capitalization above $10 billion. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.

Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.03%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.50%.

Sector Exposure and Top Holdings

It is important to delve into an ETF’s holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector–about 29.80% of the portfolio. Healthcare and Financials round out the top three.

Looking at individual holdings, Apple Inc. (AAPL) accounts for about 6.53% of total assets, followed by Microsoft Corp. (MSFT) and Amazon.com Inc. (AMZN).

The top 10 holdings account for about 26.43% of total assets under management.

Performance and Risk

VOO seeks to match the performance of the S&P 500 Index before fees and expenses. The S&P 500 Index measures the performance of the large-capitalization sector of the U.S. equity market.

The ETF has lost about -13.39% so far this year and is down about -4.92% in the last one year (as of 08/02/2022). In the past 52-week period, it has traded between $337.07 and $439.25.

The ETF has a beta of 1 and standard deviation of 24.29% for the trailing three-year period, making it a medium risk choice in the space. With about 507 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard S&P 500 ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, VOO is a reasonable option for those seeking exposure to the Style Box – Large Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Core S&P 500 ETF (IVV) and the SPDR S&P 500 ETF (SPY) track the same index. While iShares Core S&P 500 ETF has $305.40 billion in assets, SPDR S&P 500 ETF has $373.97 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.

Bottom-Line

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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Vanguard S&P 500 ETF (VOO): ETF Research Reports
 
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SPDR S&P 500 ETF (SPY): ETF Research Reports
 
iShares Core S&P 500 ETF (IVV): ETF Research Reports
 
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