If you could only make one investment for the rest of your life, many of the world's most respected financial advisors would tell you the same thing: buy an S&P 500 index fund and hold it. Among the options available, Vanguard's VOO (Vanguard S&P 500 ETF) stands out as one of the best ways to do exactly that. Here is why VOO deserves a place in virtually every investor's portfolio and why its simplicity is its greatest strength.
The S&P 500 Doubles Roughly Every 7 Years
The S&P 500 index tracks the 500 largest publicly traded companies in the United States, including household names like Apple, Microsoft, Amazon, Google, and Johnson & Johnson. It is widely considered the single best benchmark for the overall U.S. stock market and has been tracked since 1957.
Historically, the S&P 500 has delivered an average annual return of approximately 10% before inflation, or roughly 7% after adjusting for inflation. At a 10% average annual return, your investment doubles approximately every 7.2 years thanks to the power of compound growth. This is not a guarantee — individual years can vary wildly, with some years delivering 30%+ gains and others posting significant losses — but over long time horizons, the trend has been remarkably consistent.
To put that in perspective: $10,000 invested in the S&P 500 in 1990 would be worth over $200,000 today, assuming dividends were reinvested. That is the power of staying invested in the broad market over decades. You did not need to pick the right stocks, time the market, or pay an expensive fund manager. You just needed to buy, hold, and let compounding do the work.
What Is VOO and Why Is It Special?
VOO (Vanguard S&P 500 ETF) is an exchange-traded fund that tracks the S&P 500 index. When you buy a share of VOO, you are effectively buying a tiny piece of all 500 companies in the index, weighted by their market capitalization. It is instant diversification across the largest and most successful companies in America.
VOO was launched by Vanguard in 2010 and has grown to become one of the largest ETFs in the world, with hundreds of billions of dollars in assets under management. It is managed by Vanguard, the company founded by Jack Bogle, who pioneered the concept of low-cost index investing and spent his career arguing that most investors are better off in index funds than trying to beat the market with actively managed funds.
The key advantage of VOO is its extraordinarily low expense ratio.
VOO vs SPY: Why the Expense Ratio Matters
The most well-known S&P 500 ETF is SPY (SPDR S&P 500 ETF Trust), which was launched in 1993 and is the oldest and most heavily traded ETF in the world. Both VOO and SPY track the same index and deliver virtually identical returns before fees. So why do many long-term investors prefer VOO?
The answer comes down to cost. VOO has an expense ratio of just 0.03%, meaning you pay $3 per year for every $10,000 invested. SPY's expense ratio is 0.0945% — more than three times higher at $9.45 per year for every $10,000 invested. While both are low compared to actively managed funds, the difference adds up significantly over time.
Consider a $100,000 investment held for 30 years with a 10% average annual return. With VOO's 0.03% expense ratio, you would pay approximately $16,000 in total fees over that period. With SPY's 0.0945% expense ratio, you would pay approximately $50,000. That is over $34,000 more in fees for an identical investment — money that comes directly out of your returns. For buy-and-hold investors, VOO's lower expense ratio is a clear advantage.
SPY does have advantages for active traders: it has higher daily trading volume and tighter bid-ask spreads, making it slightly better for frequent trading. But for the vast majority of investors who are buying and holding for years or decades, VOO is the better choice purely because of the lower ongoing cost.
The 4% Rule: How VOO Can Fund Your Retirement
One of the most powerful concepts in retirement planning is the 4% rule, which was established by financial planner William Bengen in 1994 and later supported by the famous Trinity Study conducted by professors at Trinity University. The rule states that if you withdraw 4% of your portfolio in your first year of retirement and adjust that amount for inflation each subsequent year, your portfolio has a very high probability of lasting at least 30 years.
The 4% rule was specifically tested against portfolios composed largely of S&P 500 index investments — exactly what VOO provides. Here is how the math works in practice:
If you accumulate a $1,000,000 portfolio invested in VOO, you could withdraw $40,000 in your first year of retirement (4% of $1,000,000). Each year after that, you would adjust your withdrawal for inflation. Based on historical data going back nearly a century, this withdrawal strategy has succeeded in virtually every 30-year period tested, including periods that contained severe bear markets, recessions, and periods of high inflation.
The reason this works is that the S&P 500's average long-term return of approximately 10% significantly exceeds the 4% withdrawal rate. In most scenarios, your portfolio actually continues to grow even while you are withdrawing from it, providing a cushion against bad years and leaving a significant balance for your heirs.
This is why financial planners often recommend building the core of your retirement portfolio around a low-cost S&P 500 index fund like VOO. It is not the only thing you should own — most advisors recommend including bonds and international diversification as well — but VOO provides the growth engine that makes long-term retirement planning work.
What the Experts Say
The case for index investing is not just theoretical. Some of the most successful investors and financial advisors in the world have publicly advocated for S&P 500 index funds as the best option for most people:
Warren Buffett, widely considered the greatest investor of all time, has repeatedly stated that a low-cost S&P 500 index fund is the best investment most people can make. In his 2013 letter to Berkshire Hathaway shareholders, he wrote that his instructions for the trustee managing his wife's inheritance were to put 90% of the cash in "a very low-cost S&P 500 index fund." He has specifically recommended Vanguard's funds for this purpose.
Jack Bogle, the founder of Vanguard and creator of the first index fund available to individual investors, spent decades demonstrating that the vast majority of actively managed funds underperform their benchmark indexes after fees. His core message was simple: do not try to beat the market, just own the market at the lowest possible cost. VOO is a direct expression of that philosophy.
JL Collins, author of The Simple Path to Wealth, built his entire investment philosophy around a single Vanguard index fund (VTSAX, the total market equivalent of VOO). His book has become one of the most recommended personal finance books of the past decade, particularly in the FIRE (Financial Independence, Retire Early) community. Collins argues that a simple, low-cost index fund approach outperforms the vast majority of more complex strategies over time.
The Bogleheads community, named after Jack Bogle, is one of the largest and most respected personal finance communities online. Their core investment philosophy centers on low-cost, broadly diversified index funds. VOO is one of the most frequently recommended holdings in Boglehead portfolios, alongside a total bond market fund and an international index fund.
The Power of Consistency
One of the reasons VOO is such an effective investment is that it removes the most common mistakes investors make. You do not have to decide which stocks to buy or when to sell them. You do not have to worry about whether your fund manager is making good decisions. You do not have to pay high fees that eat into your returns year after year. You simply buy shares of VOO regularly — a strategy called dollar-cost averaging — and let the broad U.S. economy do the work for you over time.
The data overwhelmingly supports this approach. According to the SPIVA (S&P Indices Versus Active) scorecard, over a 20-year period, approximately 90% of actively managed large-cap funds underperform the S&P 500. That means the highly paid professionals running those funds, with their teams of analysts and sophisticated tools, lose to a simple index fund the vast majority of the time. And they charge significantly higher fees for the privilege of underperforming.
When you invest in VOO, you are not betting on a single company, a single sector, or a single manager's ability to pick winners. You are betting on the continued growth of the American economy as a whole. And for over a century, that has been one of the most reliable bets in financial history.
How to Get Started with VOO
Investing in VOO is straightforward. You can buy shares through any brokerage account — Vanguard, Fidelity, Charles Schwab, Robinhood, and most other brokers offer commission-free trading on ETFs including VOO. There is no minimum investment beyond the price of a single share, and many brokers now offer fractional shares, allowing you to start with as little as $1.
The simplest approach is to set up automatic recurring purchases — investing the same dollar amount on the same day each month regardless of what the market is doing. This dollar-cost averaging strategy ensures you buy more shares when prices are low and fewer when prices are high, smoothing out the impact of short-term market volatility over time.
Tracking VOO and the S&P 500 on MarketCast
If you use MarketCast, you may have already noticed that VOO is featured prominently in the app. MarketCast uses VOO as its ticker to track the S&P 500 on the main markets row — the first thing you see when you open the app. We chose VOO specifically because it is the most efficient and widely held S&P 500 ETF, and its price movement mirrors the index almost perfectly throughout the trading day.
This means that every time you glance at your TV with MarketCast running, you can see exactly how the S&P 500 is performing in real time. Whether the market is having a great day or a rough one, VOO on your main row gives you an instant read on the overall health of the U.S. stock market without having to dig through charts or open a brokerage app.
You can also add VOO to your personal watchlist alongside the rest of your portfolio. Seeing your long-term holdings on the big screen is a great way to stay connected to your investing goals without the temptation to check your phone constantly. Download MarketCast for free on your Fire TV, Apple TV, or Google TV and start tracking VOO and the rest of your portfolio from your living room.
A Final Note
No investment is without risk, and past performance does not guarantee future results. The S&P 500 has experienced significant drawdowns, including a nearly 50% decline during the 2008 financial crisis and a sharp drop during the COVID-19 pandemic in 2020. In both cases, the index recovered and went on to reach new all-time highs, but the drawdowns were painful for investors who needed their money during those periods.
VOO is best suited for money you will not need for at least 5-10 years, ideally longer. If you have a shorter time horizon, you may want to include bonds or other less volatile investments in your portfolio. And as always, this article is for educational purposes and should not be considered personalized financial advice. Consider consulting with a financial advisor to determine the right allocation for your specific situation and goals.
That said, for long-term wealth building, it is hard to find a simpler or more effective approach than regularly investing in a low-cost S&P 500 index fund like VOO. Warren Buffett bets on it. Jack Bogle built Vanguard around it. And decades of data support it. Sometimes the simplest investment is the best one.