The most popular ETF of 2023
In 2023, one ETF has raised more money than all the others, with a huge inflow of $11.3 billion as of June 6th. But this is not a hot new artificial intelligence fund or ETF capitalizing on other tech trends, although it will give you some insight into them. Instead, it's arguably one of the more boring, vanilla ETFs out there, but that doesn't mean it can't help you grow your portfolio. This is the Vanguard S&P 500 ETF (NYSEARCA:VOO ) . In fact, whether you're just starting out on your investment journey or you're already an experienced trader who has spent years in the investment game, this humble but massive ETF can serve as a solid building block for your portfolio.
Harness the power of the S&P 500 in your portfolio
The Vanguard S&P 500 ETF boasts over $300 billion in assets under management (AUM), making it the third largest ETF on the market today. While there are many complex investment strategies and products out there that claim to offer investors a head start in the market, VOO keeps it simple. He invests in the S&P 500 (SPX), an index that consists of roughly 500 of the top 500 U.S. stocks and is arguably the most important and influential index in the investment world.
The S&P 500 spans every sector of the US economy, so instead of betting on individual sectors, an ETF like VOO gives you access to everything from technology leaders like Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) , to industrial giants of the old economy such as Caterpillar (NYSE:CAT) and Deere (NYSE:DE) and everything in between.
The great thing about VOO is that it allows investors to harness the power and innovation of a large part of the US economy in one investment vehicle without having to pick their favorite sectors or stocks. An investment in VOO is essentially a bet that the top 500 or so public companies in the United States will continue to innovate and turn a profit over time, which has historically been a winning proposition.
Below you will find an overview of the top 10 VOO promotions.
Since it tracks the S&P 500 index itself, the fund is extremely diversified, owning 504 stocks, and its top 10 positions account for just 27.8% of assets. As you can see, Apple is number one with a 7.2% position in the fund, followed by Microsoft at 6.6%, Amazon ( NASDAQ:AMZN ), Nvidia ( NASDAQ:NVDA ) and Alphabet (Grade A) ( NASDAQ :GOOGL ) closes the top five largest holdings. It's not just technology stocks, though: Warren Buffett's Berkshire Hathaway (NYSE:BRK.B) and energy giant ExxonMobil (NYSE:XOM) are following.
As you can see in the table, the top VOO assets have a pretty solid collection of Smart Scores. In fact, four of the top 10 holdings—Apple, Nvidia, Alphabet, and UnitedHealth Group (NYSE:UNH)—have a Smart Scores Top 10 rating. Smart Score is a proprietary stock scoring system created by TipRanks. He rates stocks on a scale of 1 to 10 based on eight key market factors. A score of 8 or higher is equivalent to an Outperform rating, and VOO itself has a strong ETF Smart Score of 8 out of 10.
According to analysts, should you buy VOO shares?
So quantitative factors are positive about VOO, but what do Wall Street analysts think? VOO receives a Moderate Buy consensus rating on TipRanks based on analyst estimates, and VOO's average share price target of $445.50 suggests 11.9% upside potential. Of the 6,212 analyst ratings for the title, 59.13% are “buy”, 35.33% are “hold”, and only 5.54% are “sell”.
In addition to this sufficient diversification and prevalence of outreach, another attractive feature of VOO is its low cost ratio. It is hard to beat VOO's export spending ratio of just 0.03%. An investor who invests $10,000 in VOO will pay only $3 in commission in the first year. This type of easy-to-use economy structure helps investors grow part of their portfolios over time without spending too much on fees. For example, if this rate is 5% per year for the next 10 years, the investor will only pay $39 in fees over the next 10 years. Compare this to ETF returns in the market with an expense ratio of 0.75%, where investors pay $75 dollars as a $10,000 investment commission for just one year,
Sustainable performance
With this kind of diversification and the likelihood of occurrences, it's easy to see why this massive ETF is the most sound ETF in terms of inflows this year. However, there is another factor behind its popularity - its long track record. For a long time, VOO has been consistently giving investors double-digit annualized returns. No matter what time horizon you're looking at, VOO has brought you joy. As of the end of May, VOO's total annualized return is estimated at 12.8% over a three-year period. Over a five-year period, the massive ETF returned 11% of total returns annually. Further, over the past 10 years, the return on VOO paid 11.9% per annum. VOO since 2010, and since its inception in the same year, it has been 13.3% per annum.
Simple payback
While there are plenty of exotic investors out there, few will outperform ETFs like VOO in the anticipated future. While this S&P 500 ETF is not the type of investment that will give you multiple returns in a year, the reality is that there are few such investments. However, the good news is that investing in a bull market ETF, wanting it, and allowing that return to come over the years, is a time-honored way to build accumulated wealth. Investors can average dollar value over time when they have excess cash and/or when the S&P 500 falls, reinvesting dividends to further amplify these results.