The S&P 500 is within striking distance of a fresh all-time high. Is now a good time to invest?
The Vanguard S&P 500 ETF (VOO -0.02%) is one of the best ways to invest in the S&P 500, which has been a pretty smart strategy over the long term. Since 1965, the S&P 500 has produced a total return of 10.2% annualized. The Vanguard ETF has an expense ratio of just 0.03%, so you get to keep most of your gains.
While there's no guarantee that the S&P 500 will achieve the same level of performance in the future, it has historically produced 9%-10% annualized returns over most multidecade periods. Having said that, the S&P 500 isn't too far from its all-time high (as of this writing), so it's natural for investors to wonder whether now might be a good time to buy shares in an S&P 500 index fund or if it would be smarter to wait for a better opportunity.
Just under an all-time high
The S&P 500 and several other major stock indices have reached all-time highs this year and remain close to record levels. In the case of the S&P 500, the index is less than 3% below its all-time high, as of April 29.
^SPX data by YCharts.
Should you wait for a correction?
One important thing for all investors to learn is that timing the market is impossible. And quite frankly, it's unimportant if you're investing in a high-quality S&P 500 index fund for the long term. Even if you buy at a market peak, your long-term returns should likely be excellent.
For example, let's say you invested in the S&P 500 at its peak in 2007 -- just before the financial crisis sent the market plunging. By the time the S&P 500 bottomed in early 2009, it had lost about 50%. So this would seem like a pretty awful time to invest.
However, you might be surprised to learn that if you had invested in an S&P 500 index fund at the worst possible time before the 2008-2009 financial crisis, you would be sitting on a 355% total return today. If you look at the chart below, the actual 2008-2009 stock market crash barely looks like a blip over the long run. And that's the point.
^SPXTR data by YCharts.
It's also worth noting that just because the S&P 500 is near an all-time high doesn't mean it can't go even higher. Many people were "waiting for a correction" in the 2014-2015 time frame after a long post-financial crisis rally and never got one.
A better strategy
Having said that, the best way to invest in S&P 500 ETFs is a little at a time, not all at once.
One excellent strategy is to invest equal amounts of money at certain intervals. This is known as dollar-cost averaging, and mathematically, it guarantees that you'll buy more shares when prices are lower and fewer shares when prices are high.
As a basic illustration of this, let's say you plan to invest $1,000 in the Vanguard S&P 500 index fund every three months. Right now, the fund is trading for approximately $470 per share, so assuming your broker allows you to buy fractional shares, you'd buy 2.13 shares of the index fund.
Now let's say that a market correction comes, and the share price of the fund falls to $430 by the time you're ready to make another investment. This time, your $1,000 investment will buy 2.33 shares.
The bottom line is that by averaging into a fund like the Vanguard S&P 500 ETF, you're going to get a favorable average share price over time. A strategy like this is a far better way to invest than trying to decide whether to invest a lump sum now or later.
Matt Frankel has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
FAQs
Should you wait for a correction? One important thing for all investors to learn is that timing the market is impossible. And quite frankly, it's unimportant if you're investing in a high-quality S&P 500 index fund for the long term. Even if you buy at a market peak, your long-term returns should likely be excellent.
Should I invest in Vanguard S&P 500 ETF? ›
This popular Vanguard S&P tracking vehicle remains a compelling buy. The U.S. stock market has been on a remarkable bull run since October 2022, with the popular Vanguard S&P 500 ETF (VOO -0.22%) gaining an eye-popping 53.6% over this period.
What is the outlook for Vanguard S&P 500 ETF? ›
VOO 12 Month Forecast
Based on 504 Wall Street analysts offering 12 month price targets to VOO holdings in the last 3 months. The average price target is $551.85 with a high forecast of $642.19 and a low forecast of $456.52. The average price target represents a 10.89% change from the last price of $497.64.
What are the 10 stocks the Motley Fool recommends? ›
See the 10 stocks »
Mark Roussin, CPA has positions in AbbVie, Alphabet, Coca-Cola, Microsoft, Prologis, and Visa. The Motley Fool has positions in and recommends Alphabet, Chevron, Home Depot, Microsoft, NextEra Energy, Prologis, and Visa.
Is VOO a buy right now? ›
Several short-term signals, along with a general good trend, are positive and we conclude that the current level may hold a buying opportunity as there is a fair chance for VOO ETF to perform well in the short-term.
Does Vanguard outperform the S&P 500? ›
Investors looking for ETFs that have beaten both the S&P 500 and the Nasdaq Composite over the last year have come to the right place. Here's a closer look at the Vanguard Growth ETF (VUG -0.56%), Vanguard Mega Cap Growth ETF (MGK -0.53%), and the Vanguard Communications Services ETF (VOX 0.08%).
What is the best ETF for S&P 500? ›
- SPY, VOO and IVV are among the most popular S&P 500 ETFs.
- These three S&P 500 ETFs are quite similar, but may sometimes diverge in terms of costs or daily returns.
- Investors generally only need one S&P 500 ETF.
The best ETFs to buy now
| Exchange-traded fund (ticker) | Assets under management | Expenses |
|---|
| Vanguard Dividend Appreciation ETF (VIG) | $76.5 billion | 0.06% |
| Vanguard U.S. Quality Factor ETF (VFQY) | $333.3 million | 0.13% |
| SPDR Gold MiniShares (GLDM) | $7.4 billion | 0.10% |
| iShares 1-3 Year Treasury Bond ETF (SHY) | $24.4 billion | 0.15% |
1 more rowVGT has a consensus rating of Moderate Buy which is based on 238 buy ratings, 80 hold ratings and 5 sell ratings. What is VGT's price target? The average price target for VGT is $636.64. This is based on 323 Wall Streets Analysts 12-month price targets, issued in the past 3 months.
What is the 5 year forecast for Vanguard S&P 500? ›
Vanguard 500 stock price stood at $502.89
According to the latest long-term forecast, Vanguard 500 price will hit $600 by the end of 2025 and then $700 by the end of 2027. Vanguard 500 will rise to $800 within the year of 2028, $900 in 2029, $1000 in 2030, $1100 in 2032 and $1200 in 2034.
5 best stocks to buy
| S.No. | Top 5 Stocks | Industry/Sector |
|---|
| 1. | Shriram Finance | NBFC |
| 2. | SBI Life Insurance | Insurance |
| 3. | Axis Bank | Banking |
| 4. | Mahindra & Mahindra | Auto |
1 more row6 days ago
Here's how to invest $1,000 and start growing your money today.
- Buy an S&P 500 index fund. ...
- Buy partial shares in 5 stocks. ...
- Put it in an IRA. ...
- Get a match in your 401(k) ...
- Have a robo-advisor invest for you. ...
- Pay down your credit card or other loan. ...
- Go super safe with a high-yield savings account. ...
- Build up a passive business.
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| Company (ticker) | Analysts' consensus recommendation score | Analysts' consensus recommendation |
|---|
| Nvidia (NVDA) | 1.31 | Strong Buy |
| Amazon.com (AMZN) | 1.32 | Strong Buy |
| Emerson Electric (EMR) | 1.32 | Strong Buy |
| Microsoft (MSFT) | 1.33 | Strong Buy |
19 more rowsWhen to buy and sell ETF units. To get an ETF price that is more likely to represent its underlying value, place your trades at least 30 minutes after the market opens. It's also better to buy or sell ETFs when the market for the underlying asset is open.
Which is better, S&P 500 or VOO? ›
The S&P 500 simply reflects the market composition. In the long run, the funds' broad diversification, low turnover, and low fees outweigh these risks.” While the two ETFs follow the same strategy, they earn different ratings. VOO earns a top rating of Gold, while SPY earns the next best rating of Silver.
Will VOO go down in 2024? ›
As aforementioned, I'm forecasting VOO to end 2024 with a price of around $428, about 8% below its current price. And let me walk over the rationale behind the table. According to LSEG data, analysts expect overall S&P 500 earnings to rise 9.5% in 2024 compared to 2023.
What's the difference between S&P 500 and Vanguard S&P 500? ›
Vanguard S&P offers a lower expense ratio (0.035%) than SPY (0.095%), which means lower costs for investors and potentially higher net returns over the long term. VOO might be the more economical choice for cost-conscious investors, especially those investing large sums or planning for long-term goals like retirement.
How much does Vanguard S&P 500 return? ›
Quarterly after-tax returns
| S&P 500 ETF | 1-yr | 10yr |
|---|
| Returns after taxes on distributions | 29.36% | 12.42% |
| Returns after taxes on distributions and sale of fund shares | 17.91% | 10.66% |
| Average Large Blend Fund | |
| Returns before taxes | 27.24% | 11.45% |
3 more rowsVanguard S&P 500 ETF (VOO)
Over the trailing 10 years, VOO has returned an annualized 12.4% with all distributions reinvested. This strong performance was largely made possible by its low turnover rate of 2.2% and minimal 0.03% expense ratio, both of which minimized drags on long-term net returns.
Is Vanguard Financial ETF a good investment? ›
While it depends on your financial situation and existing portfolio, Vanguard ETFs could make sound investments for most individuals, especially if you plan to invest over a long period.
