3 Things Every Vanguard S&P 500 ETF Investor Needs to Know
3 Things Every Vanguard S&P 500 ETF Investor Needs to Know
Todd Shriber, The Motley FoolMon, March 9, 2026 at 8:07 PM UTC
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Key Points -
The Vanguard S&P 500 ETF is the largest ETF in the world.
It's a practical, cost-effective way to get exposure to the stock market.
Believe it or not, it’s not the cheapest ETF out there.
10 stocks we like better than Vanguard S&P 500 ETF ›
The S&P 500 is the world's most widely followed equity index, and the world of exchange-traded funds (ETFs) confirms as much.
Each of the top three U.S.-listed ETFs, including the Vanguard S&P 500 ETF (NYSEMKT: VOO), tracks the S&P 500. Led by the Vanguard fund at $865 billion, those three ETFs combine for a staggering $2.28 trillion in assets under management (AUM). The other members of that trio are the iShares Core S&P 500 ETF (NYSEMKT: IVV) and the State Street SPDR S&P 500 ETF (NYSEMKT: SPY).
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The Vanguard ETF's AUM lead over the second-place iShares fund is sizable at north of $124 billion, but there are other details for investors, particularly those new to the game, to consider. Let's look at three important ones here.
The ETF acronym inside a magnifying glass.
With S&P 500 ETFs, the details matter. Image source: Getty Images.
1. S&P 500 ETFs are diverse...sort of
This isn't an indictment of the Vanguard fund, because what follows is true of all the ETFs mentioned, but the reality is that S&P 500 index funds aren't as diverse as they used to be or as diverse as some market participants expect these products to be.
Translation: The Vanguard ETF and its brethren allocate significant portions of their lineups to a small number of stocks. As of the end of January, the top five holdings in the Vanguard fund combined for approximately 27% of its weight. By the S&P 500's historical standards, that level of concentration is elevated.
As for how that situation materialized, it's the result of the index's weighting components based on market capitalization. Put simply, as a stock's market cap increases, it takes on a larger slice of a cap-weighted pie, such as the S&P 500.
2. It's a blend ETF, or is it?
Experienced investors know about style, and that doesn't mean the GQ or Vogue type. When it comes to ETFs or other funds, they're classified by a combination of market capitalization and style, such as growth, value, or a blend fund.
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This Vanguard ETF and its S&P 500 peers are classified as large-cap blend funds, but are they really? Due to the aforementioned market-cap-weighted methodology, S&P 500 ETFs tilt heavily toward growth stocks. For example, the Vanguard fund's overlap with the Vanguard S&P 500 Growth ETF (NYSEMKT: VOOG) by weight is 64%. That's well ahead of the 44% overlap shared between the S&P 500 and the Vanguard Value ETF (NYSEMKT: VTV).
By the letter of the law, S&P 500 ETFs are blend funds, but they tilt more toward growth stocks than some investors realize.
3. It's a cheap ETF, but not the cheapest
One of the primary reasons why so many investors love Vanguard ETFs and index funds is the low expense ratios. The Vanguard S&P 500 lives up to that heritage, charging just 0.03% annually, or a mere $3 on a $10,000 investment.
That's a really good deal, but for buy-and-hold investors that want to save every dollar possible, the State Street SPDR Portfolio S&P 500 ETF (NYSEMKT: SPYM) is even less expensive at 0.02% per year.
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Todd Shriber has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF and Vanguard Value ETF. The Motley Fool has a disclosure policy.
Source: “AOL Money”
