Is Investing in VOO – an S&P 500 Index Fund Portfolio – a Wise Decision for Relaxing and Earning?

by | Sep 13, 2023 | Fidelity IRA | 40 comments




You’ll often hear the phrase VOO and chill or sometimes VTI and chill. VOO is the ticker to Vanguard’s S&P 500 index ETF (VTI is Vanguards total U.S. market ETF). The idea is to invest all of your money in the S&P 500 (or perhaps the total U.S. market) and just relax.

After my video showing my 2021 portfolio tracked the performance of the S&P 500 (more or less), many asked why I bothered with multiple asset classes and individual stocks. Why not just VOO and chill?

This video explains why, and more importantly, walks through some concepts that might help you decide what’s best for your portfolio.

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#voo #vooandchill #robberger

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While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I’m the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.

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VOO and Chill | Is An S&P 500 Index Fund Portfolio a Smart Idea?

Investing in the stock market can be an overwhelming task, especially for beginners. With numerous investment options available, it can be challenging to determine which approach is the most suitable for your financial goals. However, one investment strategy that has gained popularity among investors is building a portfolio around an S&P 500 index fund, such as VOO.

VOO, also known as the Vanguard S&P 500 ETF, is an exchange-traded fund that tracks the performance of the S&P 500 index. The S&P 500 is a widely recognized stock index comprising the 500 largest publicly traded companies in the United States. By investing in VOO, an investor gains exposure to these 500 companies and can benefit from their combined growth.

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The primary advantage of investing in an S&P 500 index fund like VOO is the diversification it offers. Instead of investing in individual stocks, which can be risky, VOO allows investors to spread their investment across a wide range of companies. This diversification mitigates the impact of any particular company’s performance, reducing the overall risk of the portfolio. It also ensures that investors are partaking in the growth of the overall U.S. stock market.

Furthermore, investing in an S&P 500 index fund is a cost-effective option for investors. Since these funds are passively managed, they have lower expense ratios compared to actively managed funds. The lower costs translate into higher returns for investors over the long term, as fees and expenses can eat into investment gains. Additionally, VOO has a low turnover rate, which minimizes capital gains taxes, making it even more appealing to long-term investors.

Another advantage of VOO is the ease of implementation and maintenance. Setting up a portfolio with VOO is a straightforward process, making it an attractive option for beginners who may find the stock market intimidating. Additionally, since the fund aims to replicate the S&P 500 index, investors do not need to continually monitor and adjust their portfolio. This simplicity can be particularly appealing to individuals who prefer a hands-off approach to investing.

However, it is important to note that investing in an S&P 500 index fund like VOO is not without its drawbacks. One significant disadvantage is the lack of exposure to smaller companies and sectors that may outperform the overall market. While the S&P 500 index consists of well-established and reputable companies, it may not capture the growth potential of smaller, yet promising, enterprises. Therefore, investors seeking potentially higher returns may consider supplementing their VOO portfolio with other investments focused on specific sectors or market segments.

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Additionally, although the S&P 500 has historically delivered strong returns over the long term, past performance does not guarantee future results. Market fluctuations and economic uncertainties can impact the performance of the index and, subsequently, the VOO fund. Therefore, investors should be mindful of their investment horizon and risk tolerance when considering an S&P 500 index fund.

In conclusion, building a portfolio around an S&P 500 index fund like VOO can be a smart idea for many investors. The diversification, low costs, ease of implementation, and long-term performance potential make it an attractive investment option. However, investors should be aware of the limitations and potential risks associated with investing solely in an index fund. For those seeking a relatively hassle-free and cost-effective way to participate in the growth of the U.S. stock market, VOO might just be the right choice. So, VOO and chill while your investment portfolio grows steadily.

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40 Comments

  1. Jelly G.

    VOO+VB+VXUS and chill.

  2. RJ B

    The S&P 500 companies are all mostly Global so they are in effect US and international stocks noh?

  3. Taco Cruiser

    Alternate between VOO, VXUS, and BND depending on which etf has performed the best over the last 12 months. Its all about momentum. The assets that out-performed over the past year will most likely out-perform over the next month (at least). You just have to remember to check the momentum of the three etfs each month to see which one is best.

  4. Amanda Louise Medford

    Retirement timing and choice determines a lot in one's life. Investing before retirement comes, is another. My parents spent same number of years working full time jobs, but my mom was investing through a financial manager while my dad by himself. My mom retired with over $6.5 million, whereas my dad retired with little above to $500k. It is your choice on how you invest. As for me I invest with my financial manager Robin Brezik , and I have never regretted it, as my portfolio keeps increasing.

  5. jec1ny

    I'm more of a VT and chill guy. I like a little more diversity. As for the question of international vs all US, over the 50 years from 1970-2020, international outperformed for three of the five decades. The US did better over the long term though. Today the US represents around 25% of the global economy. But the US stock market represents around 60% of the global equity markets. International stocks are currently paying around twice the dividend of the S&P 500. How long do people think this is going to last? It's not 1945 anymore. For that matter, it's not even 1985. The world is evolving, and America's share of the global economy is slowly shrinking. Long term VOO is probably fine. But my gut says international stocks are cheap and we are witnessing, albeit in slow motion, the end of the post WWII economic era. I'd rather own the global stock market.

  6. Dave Hermanson

    Would you compare VOO to VTI?

  7. Chloe Benson Boxes and Bags

    I have used the VOO or S&P 500 most of my life. I will be able to retire at 55. I plan to keep it there but add a cash/CD bucket of 20%.

  8. Janet Hunt

    Thank you for this. It makes me feel better that we gave a wedding gift into a Vanguard Target fund instead of VOO to our son and his wife which I was second guessing.

  9. david brooks

    SCHB and SCHG!!

  10. AnalyticsX^3

    You can’t argue data but there’s a lot of factors at play. Before the 90s no one had the internet. Manufacturing was still in the US. Today we have technology. Not many technology companies are small cap. Time in the market is the most important takeaway I see from that analysis

  11. larrysplace00

    One argument for VOO is that they are multinational companies that own assets and sell products internationally. The percent of foreign assets or sales who knows.

  12. IMDOC78

    My financial advisor had my 401k distributed among large cap, mid, and small. I opened a deferred comp account and allocated a Warren Buffett 90/10 style portfolio and have been outperforming him for the past two years.

  13. Kristopher D'Erasmo

    I am not really a Vanguard "fan-boy" so I went with FXAIX for my S&P 500 fund since I invest with Fidelity (401k and IRA's). It pretty much has identical performance as VOO and half the expense ratio at 0.015% vs. 0.03%. Every little bit helps. I am not totally against Vanguard. I have some VGT as well. My 401k is basically FXAIX, SCHD, VGT, IEFA, XSD, a little bit of bonds and my Roth IRA is FXAIX, SVOL, O, and WPC.

  14. Chris Gaines

    S&p500 index and growth index

  15. Bill Traylor

    I'm hoping you have a new video with recommendations or options of index investing in light of how dismal the markets have been since early 2022

  16. J J

    Sir, how about VTWAX. That's total diversification. I can combine that with t bills, savings or CDs at this point too.

  17. tonicK TV

    Are there any funds that will add mainly 'US Small and Mid Cap Values' to better expose a 'VOO And Chill' porfolio to those lower market caps?

    Also, I can't find any US Mid or Small Cap Value funds that have outperformed VOO since 1985. What gives?

  18. Eric Schneider

    I watched this again and used VSIAX specifically against VTSAX instead of the generic small cap value and large cap. The period was restricted to a 10yr period of 2012 to 2022. VTSAX outperformed the VSIAX in return by $16k and CAGR by a percent or so.

  19. Dusty Plains

    SPY all day liquidity liquidity liquidity

  20. Erik Dunkelberger

    On the chart, the Small Cap separated heavily from the Large cap back in the first years of the chart. They both continue to grow at seemingly the same rate. Can someone explain that? Edit: What I’m getting at is it seems the major difference in portfolio value is due to the separation in the 70s. If you did a lump sum from 1985-present it would be about the same growth. So the way to get these results would be to predict a separation of huge proportions between the Small Caps and the Large Caps.

  21. RRalphy Miller

    I find most large and mid cap companies have international ties these days. I am rather new at this DIY investing and I’m investing in US and Canada only.

  22. financial impact & Growth channel

    Hello! Brother, I hope you are doing well.
    I am one of your viewers who watches your videos and subscribe to your channel. Please I seriously need your assistance. Please I need you to kindly make a detail step -by-step video on how to invest in the SNP500 index fund from Nigeria. If am
    Outside the USA thanks for understanding

  23. Josh Lawless

    What do think when it comes to SCHD VS SWPPX VS the VOO?

  24. Super Dave

    The sp 500 are international companies by default by being so big

  25. Fabiano Pina

    Ijr looks to have a better history than vb, vbr and vbk. Paralysis of the analysis

  26. Dr. D

    Direct, clear and valuable insight. Thank you. Subscribed.

  27. Vacation Bullies

    Do what you want with your money. Long as you are investing its better than not. If you allocate some in the US that's cool. If u don't that is cool too. Remember it your money.

  28. e w

    So how much do you need to invest in it to get about 50000 dollars a year in income?

  29. Enter Tainment

    What are your 6 or 7 funds of choice??

  30. tr3slech3s

    What the hell is “Chill”? VOO all day

  31. RJ Lane

    It would be interesting to see the benefits of having only 1 fund (like VOO) where there was never a tax from rebalancing

  32. david brooks

    What about VTI??

  33. Eagle28

    I love my VTSAX case closed lol

  34. A J

    I always knew that small cap will eventually overgrowth S&P500 at some point, i think for me VOO / VTI is purely for people who just want the most safety investment this world have to offer without you having to stress a single thing.

  35. Jeffrey Phillips

    I can't sell my stocks right now because they're down, but when I get back to even I'll put most of it in voo and vti

  36. g paramaeswary

    Non US residents dont buy VOO.
    30% witholding tax on dividends.
    Up 40% estate tax above 60k assets

  37. Alex B

    FXAIX and chill

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