2 Invincible Vanguard ETFs to Buy With $800 During the S&P 500 Bull Market

The stock market is trading at new all-time highs in 2024, but it’s not too late for investors to get involved.

S&P 500 (^GSPC 0.12%, A new record was set earlier this year, reinforcing the bull market that began at the index’s low in October 2022. As it continues to move higher, investors may be wondering if it’s too late to buy.

It’s almost impossible to time the market, but history shows timing In The market is far more important when it comes to generating reliable returns. In fact, the S&P 500 has delivered a compound annual return of 10.3% since its inception in 1957, meaning a $1,000 investment at that time would be worth more than $761,355 today.

Buying exchange-traded funds (ETFs) is a great way to capture those benefits in a diversified and safe way. Vanguard Group is one of the largest issuers of ETFs in the world, and it offers several funds designed to track the performance of popular indexes like the S&P 500.

That’s why investors sitting on idle cash might want to allocate $800 to buy a share of Vanguard S&P 500 ETF (flight 0.15%, and a part of Vanguard S&P 500 Growth ETF (Volume 0.01%,,

1. Vanguard S&P 500 ETF (VOO)

The VOO ETF aims to solely track the performance of the S&P 500. It achieves this by placing stakes in all 500 companies in the index with very equal weightings.

The S&P 500 is incredibly diversified, making it a great choice for investors of all experience levels. It is home to 11 different sectors, including information technology, health care, energy, financial, and real estate, so it covers a broad cross-section of the US economy.

Companies must meet strict criteria to enter the S&P 500, including a minimum market capitalization of $18 billion and a requirement that they must be profitable, so it automatically filters out high-risk stocks that are prone to volatility. There may be a possibility of.

The top five holdings in the VOO ETF (and the S&P 500) come from the information technology sector, as it hosts the world’s largest technology companies:

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VOO ETF Portfolio Weights

1. Microsoft

6.83%

2. Apple

5.83%

3. NVIDIA

5.04%

4. Amazon

3.77%

5. alphabet class a

2.26%

Data Source: Vanguard. Portfolio weightings are accurate as of April 30, 2024 and are subject to change.

Those five companies have a proven track record of success spanning decades, and they continue to be leaders in new technology areas like artificial intelligence (AI). Microsoft is incorporating AI across its entire product portfolio, thanks to a $10 billion investment it made last year in ChatGate maker OpenAI. Apple also plans to bring AI capabilities to its 2.2 billion active devices worldwide, from iPhones to Mac computers.

But AI wouldn’t be possible without Nvidia. It designs the industry’s most powerful chips for the data center, where developers build, train, and deploy their AI models. Simply put, despite its diverse composition, the VOO ETF still gives investors exposure to the most exciting areas of the technology industry.

VOO ETF is also popular for its cheap holding costs. Its expense ratio is only 0.03%, which is deducted from the fund’s total assets each year to cover staff, marketing and general operating expenses. Vanguard says comparable funds in the industry charge an average of 0.79%, which eats up investors’ returns over the long term.

Investors who want to track the performance of the S&P 500 Index (which I mentioned earlier) should look no better than the VOO ETF.

2. Vanguard S&P 500 Growth ETF (VOOG)

Investors who want the opportunity to earn higher returns by taking on a little more risk should consider the VOOG ETF. it tracks S&P 500 Growth IndexWhich notably has the 228 fastest growing stocks in the S&P 500 index.

It chooses those stocks based on their revenue growth, their stock price in proportion to their earnings and their momentum. The same 11 S&P 500 sectors are represented in this index, but their weightings are very different. For example, Information Technology accounts for 29.2% of the S&P 500, but its share of the S&P 500 Growth Index is 46.8%. Why? Because tech companies grow faster than their competitors.

So, it’s not surprising that the top five holdings in the VOOG ETF are exactly the same as the VOO ETF, but pay close attention to their weightings – Microsoft, for example, represents 12.48% of VOOG’s total value, compared to 6.83% for VOO only.

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VOOG ETF Portfolio Weights

1. Microsoft

12.48%

2. Apple

10.67%

3. Nvidia

9.21%

4. Amazon

6.90%

5. Alphabetical class A

4.14%

Data Source: Vanguard. Portfolio weightings are accurate as of April 30, 2024 and are subject to change.

The higher weighting toward technology stocks is the source of VOOG’s outperformance compared to VOO (which I’ll measure in a moment). For example, Nvidia stock is up 223% in the past year, so naturally ETFs holding more Nvidia stock have delivered higher returns.

There are some caveats. First, if technologies like AI fail to live up to the hype, tech stocks could suffer a period of underperformance that would undercut the VOOG ETF’s returns, at least for as long as its portfolio. Rebalance to reflect that new reality.

Second, VOOG has an expense ratio of 0.1%, which is slightly higher than the VOO ETF (but still cheap relative to the industry), so investors will pay a premium for the opportunity to earn higher returns.

Over the past year, the VOOG ETF has returned 26.6% compared to the VOO ETF’s return of 22.6%. Since its inception in 2010, VOOG has delivered a compound annual return of 15.3%, compared to 14% for VOO. Although this doesn’t seem like much improved performance, the extra 1.3% added over the course of 14 years makes a significant difference:

starting balance

compound annual return

Balance after 14 years

$1,000

15.3% (quantity)

$7,338

$1,000

14% (flying)

$6,261

Calculated by author.

Therefore, there is no better time than the present to buy this growth ETF. The longer investors hold it, the better their potential returns could be.

Suzanne Frey, an Alphabet executive, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no positions in any stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, Nvidia, and the Vanguard S&P 500 ETF. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

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Disclaimer : The content in this article is for educational and informational purposes only.

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