Simple ETF Analysis – Vanguard S&P 500 (VOO)

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Nowadays, there are so many ETFs to choose from and so many providers offering similar choices. And in the world of low-cost index funds and ETFs, Vanguard is at the top of the game.  With a variety of products to suit your investment style, Vanguard has something for every investment style. So let’s a take a look at the popular Vanguard S&P 500 ETF, ticker symbol VOO and see how it stacks up. 

VOO’s designed to track and mimic the S&P 500, plain and simple. If you’re invested in VOO, you’re invested in the success of the S&P 500 and its companies.

Vanguard itself was established by the late Jack Bogle. His passion was to provide low-cost investments to average investors and, thus to keep fees to a minimum. If you look across Vanguard’s products or services, they offer products with very low fees.

Disclaimer: I am not receiving any compensation from Vanguard for any part of this writing. 

VOO – History

VOO’s inception date was 9/7/2010, so it is almost 10 years old. This is considered fairly new in the investment world. Other funds have been around for 10, 20 or more years. At the same time, it’s important to note that the first ETF was established in 1993, just about 25 years ago. So ETFs as an investment vehicle are fairly new themselves.

VOO’s objective is to track the benchmark index of large capitalization stocks. Naturally, it follows the S&P 500 Index.

And even though VOO is fairly new, Vanguard as a company has other ETFs which have been established for many years. For example, Vanguard’s Total Stock Market ETF – VTI was established on 5/21/2001 – nearly 20 years ago.

VOO’s – Composition

The top 10 holdings are all familiar faces we know and whose products and services many of use as customers:

And what’s also interesting is that the top 5 companies are highly technologically driven. Roughly 20% of VOO’s sector composition is in Information Technology.

The holdings noted above are very similar to the top 10 components of the S&P 500 index itself:

In terms of overall diversification, an investor can gain comfort in knowing that VOO holds over 500 different securities and across major sectors such as Information Technology, Healthcare, Financials, Communication Services, Consumer Discretion and Industrials. The remaining sectors are included in VOO’s composition, but with smaller weightings of under 10% in each.

VOO – Dividend

As mentioned earlier, VOO’s objective is to track the S&P 500, which is comprised of large cap companies. So VOO’s focus is not income generation. If you’re primary objective is earning investment income in the form of dividends, there are specific ETFs out there that can help you achieve that objective.

Having said that, VOO pays a dividend yield of 2.01%, annualized to $5.16 and paid out quarterly.

VOO’s dividend has grown 6.4% over the past three years. 

VOO does offer dividend payments when you buy its shares. Looking at it from another viewpoint, Amazon is the third largest holding in VOO, and it does not offer dividends at this time.

VOO – Performance & Fees

An ETF is good if it can track its index well. Can VOO do this? When compared with the S&P 500, the performance at 5 years is 8.45% for VOO and 8.49% for the S&P; that’s pretty close – i.e. a 0.04 tracking error. Here’s a chart depicting this performance:

It is following the S&P so closely that you can even see its line on this chart.

In terms of fees, VOO charges 0.04% annually on your assets. This is super-low and not surprisingly at all when looking at Vanguard’s family of funds.  I wouldn’t expect a passively-managed fund to charge a lot in the first place. Simply put, if you invest $5,000 into VOO, you’ll be charged $2.00.

VOO – Simple Comparison to Peers

From a quick Google search of the top S&P 500 ETFs, I was able to compile this short list and some information for comparison purposes:

Fund Name Expense Ratio Inception Net Assets Yield Tracking Error
iShares Core S&P 500 ETF (IVV) 0.04% 5/15/2000 154B 2.04% 0.05
Vanguard S&P 500 ETF (VOO) 0.04% 9/7/2010 434B 1.91% 0.04
SPDR S&P 500 ETF Trust (SPY) 0.09% 1/22/1993 250B 1.89% 0.05

There are some interesting points to note here:

  • SPY is the oldest of the three funds and the most costly
  • IVV pays the highest yield of the three funds
  • VOO has the largest net assets of the three funds and a slightly lower tracking error

VOO – Final Thoughts

To wrap things up, even though VOO is a relatively new fund, compared to its peers it still has competitive attributes. VOO’s performs well in that it tracks the S&P 500 index very closely, has low fees, is a large sized ETF compared to peers, and possesses the reputation of being in the Vanguard family of low cost funds. And so I decided to pick up some shares, primarily to balance out my portfolio.

Disclaimer: At the time of this writing, I do own a number of shares of VOO.

Join The Discussion:

  1. Do you own VOO?
  2. Do you own any ETFs or index funds?
  3. What percentage of your portfolio is comprised of S&P 500 holdings?

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