Creating 'Dynamic' Asset Allocation
"Bloomberg ETF IQ" focuses on the opportunities, risks and current trends tied to the trillions of dollars in the global exchange traded funds industry. Today's guests: CIO of Elm Wealth and Co-founding Partner of Long-Term Capital Management Victor Haghani and Vanguard Fixed Income Product Manager Rebecca Venter. (Source: Bloomberg)
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If I Could Invest $1,000 In Any Vanguard ETF, It Would Undoubtedly Be This One
Investing in the S&P 500 offers instant diversification, exposure to blue chip stocks, and proven historical results. The Vanguard S&P 500 ETF is one of the cheapest exchange-traded funds on the stock market. They're not directly correlated, but the S&P 500's performance is used as a broad gauge of the U.S. economy. 10 stocks we like better than Vanguard S&P 500 ETF › One of the biggest misconceptions about investing is the amount of effort and time required to do it successfully. In some cases, it pays to dedicate a lot of time and energy to selecting the right stocks. However, for most people, this isn't necessary, and good returns can be accomplished via exchange-traded funds (ETFs). Investing in ETFs allows investors to achieve instant diversification in many cases, removes much of the guesswork from investing, and reduces the risk associated with investing in individual stocks. No need to listen to earnings calls, read financial statements, or tune into every headline. Simply invest in the ETF and let multiple companies do the work. There are thousands of ETFs on the stock market, but there's one ETF in particular that I'd invest $1,000 (or any amount) in without thinking twice: The Vanguard S&P 500 ETF (NYSEMKT: VOO). The Vanguard S&P 500 ETF mirrors the S&P 500 (SNPINDEX: ^GSPC) index, which tracks the 500 largest American companies on the stock market. The S&P 500 and the U.S. economy aren't directly tied, but the size and importance of these companies to the U.S. economy make the S&P 500 a broad representation of that economy. According to S&P Global, S&P 500 companies accounted for around 80% of the available U.S. market cap. There are multiple S&P 500 ETFs to choose from, but I prefer the Vanguard ETF because of its low 0.03% expense ratio. For perspective, the more popular SPDR S&P 500 ETF Trust has an expense ratio that's more than three times higher, at 0.0945%. The difference may seem small, but it could easily add up to hundreds or thousands of dollars over time. Combine that low cost with instant diversification and exposure to some of the world's top blue chip stocks, and it's a trifecta worth having in your portfolio. This ETF is weighted by market cap, so larger companies account for more of it than smaller companies. As a result, mega-cap tech stocks ($200 billion or more) and the information technology (tech) sector as a whole make up a larger portion of the ETF than they did in previous years. This concentration has reduced some of the ETF's diversification, but it still manages to cover ground in all 11 major sectors: Information Technology: 31.7% of the ETF Financials: 14.2% Consumer Discretionary: 10.7% Health Care: 9.6% Communication Services: 9.6% Industrials: 8.7% Consumer Staples: 5.9% Energy: 3% Utilities: 2.5% Real Estate: 2.1% Materials: 2% The tech sector has easily been the best-performing over the past decade, so it has worked out in investors' favor. Still, it's something to keep an eye on as you potentially invest in other stocks or ETFs, because you don't want to become too reliant on the tech sector's success. If we assume (with the emphasis on "assume") that this ETF continues to average 12% annual returns, here's how much a one-time $1,000 investment could grow to in different years. Years Investment Value 15 $5,400 20 $9,500 25 $16,880 30 $29,700 35 $52,300 Table by author. 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The Motley Fool has a disclosure policy. If I Could Invest $1,000 In Any Vanguard ETF, It Would Undoubtedly Be This One was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
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SPY Is a Great Choice for Most, but I Like VOO ETF Better.
Investing in the S&P 500 is banking on the growth of the U.S. economy over time. The Vanguard S&P 500 ETF has an expense ratio that is three times lower than that of the SPDR S&P 500 ETF Trust. Using a strategy like dollar-cost averaging can help reduce the temptation of trying to time the market. 10 stocks we like better than Vanguard S&P 500 ETF › When exchange-traded funds (ETFs) were created, it was a game-changer for investing because it allowed people to create diversified portfolios with one to a few investments. This simplified investing and removed some of the barriers that could have turned off potential investors in the past. The SPDR S&P 500 ETF Trust (NYSEMKT: SPY) holds a special place in U.S. stock market history because it was the first ETF ever listed in the U.S. Today, it's the second-largest ETF in the world, with over $610 billion in assets under management as of June 19. There aren't many ETFs that can serve as the foundation of a stock portfolio, but an S&P 500 ETF like SPY is one of those. It has a winning trio: diversification, access to blue chip companies, and proven results. The S&P 500 (SNPINDEX: ^GSPC) tracks 500 of the largest American companies on the stock market. It's often seen as a broad gauge of the U.S. economy due to the significant contributions these companies make to the economy and the wide range of sectors they span. When you invest in SPY, you're essentially banking on the growth of the U.S. economy. With large tech stocks skyrocketing in valuation over the past few years, the information technology (tech) sector has a large representation in SPY, but you still get access to leaders from all major sectors. Here's how SPY is broken down: Sector Percentage of the ETF Information technology 32.40% Financials 13.93% Consumer discretionary 10.43% Communication services 9.80% Health care 9.53% Industrials 8.60% Consumer staples 5.63% Energy 3.23% Utilities 2.41% Real estate 2.11% Materials 1.93% Data source: State Street Global Advisors. Percentages as of June 17. The tilt toward tech makes sense when you consider that nine of SPY's top 10 holdings are tech companies, and they all have a market cap of over $1 trillion (as of June 19). The only non-tech company in the top 10 is Berkshire Hathaway. The S&P 500 rebalances quarterly, so these percentages will naturally change as SPY adjusts its holdings to better reflect the index. However, it's worth keeping an eye on as you invest in other stocks and may want to complement this ETF to help ensure your portfolio remains well diversified and in line with your risk tolerance. Despite all the great things about SPY, my personal preference is the Vanguard S&P 500 ETF (NYSEMKT: VOO) -- and it comes down to its expense ratio compared to SPY. VOO's expense ratio is 0.03%; SPY's is 0.0945%. Expense ratios are fees charged annually as a percentage of your total investment value, and although many differences seem ignorable on paper, they add up quickly as your money grows. To see just how much a slight 0.0645% difference can make in real-world dollars, let's assume you invest $500 monthly and average 10% annual returns. Below are the differences in fees paid with VOO versus SPY. Years Invested Fees Paid With 0.03% Expense Ratio Fees Paid With 0.0945% Expense Ratio 10 $137 $431 15 $452 $1,422 20 $1,168 $3,666 25 $2,655 $8,321 30 $5,588 $17,488 Calculations by author. Fees are rounded to the nearest dollar. Even though you're investing in the same index (though the percentages of each holding slightly vary), the difference in fees between the ETFs can be hundreds to thousands of dollars over time. Neither SPY nor VOO are get-rich-quick investments (those don't exist) or ETFs that you should expect to experience hypergrowth. However, they are solid investments that have historically had solid returns, making many people millionaires along the way. The best thing investors can do is focus on making consistent investments, regardless of market conditions. This is when a strategy like dollar-cost averaging comes in handy. By dollar-cost averaging, you remove the urge to try to time the market because you're on a set investing schedule. Sometimes, you'll invest when prices are falling; sometimes, you'll invest when they're rising. Ideally, you'll trust that it evens out over time, and the long-term growth is there. 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See the 10 stocks » *Stock Advisor returns as of June 9, 2025 Stefon Walters has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Berkshire Hathaway and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy. SPY Is a Great Choice for Most, but I Like VOO ETF Better. was originally published by The Motley Fool
