Vanguard S&P 500 ETF

The Vanguard S&P 500 ETF (VOO) is a fund that invests in the stocks of some of the largest companies in the United States. VOO is an exchange-traded fund (ETF) that tracks the S&P 500 index by owning all of the equities within the S&P 500. The S&P 500's investment return is considered a gauge of the overall U.S. stock market.

An index is a hypothetical portfolio of stocks or investments representing a specific portion of the market or the entire market. The S&P 500 and the Dow Jones Industrial Average (DJIA) are both examples of broad-based indexes. Investors cannot invest in an index. Instead, they can invest in funds that mirror an index.

Key Takeaways

  • The Vanguard S&P 500 ETF tracks the S&P 500 index by investing in all of the stocks in the S&P 500.
  • The ETF is comprised of the equities of large U.S. corporations.
  • The Vanguard S&P 500 ETF appeals to many investors because it's well-diversified.
  • The fund is heavily weighted in information technology, health care, and consumer discretionary.
  • The Vanguard S&P 500 ETF offers low fees because the fund's management team is not actively trading, instead just mirroring the S&P 500.

Understanding the Vanguard S&P 500 ETF (VOO)

The S&P 500 represents 500 of the largest U.S. companies. The goal of the Vanguard S&P 500 ETF is to track the returns of the S&P 500 index.

VOO appeals to investors because it's well-diversified and is made up of equities of large corporations—called large-cap stocks. Large-cap stocks tend to be more stable with a solid track record of profitability as opposed to smaller companies. Dividends are typically cash payments paid to investors by companies as a reward for owning their company's stock.

The broad-based, diversified portfolio of stocks within the fund can help lessen but not eliminate the risk of loss in the event of a market correction.

Fund Snapshot

Some of the key characteristics of the Vanguard S&P 500 (as of Oct. 3, 2022) include:

Vanguard S&P 500 ETF (VOO) Overview
 Expense Ratio 0.03%
Assets (AUM)  $754.1 billion
Number of Holdings  503
Turnover Rate 2.3%
SEC Yield 1.57%
P/E Ratio 19.8x
P/B Ratio 3.7x
Avg. Daily Volume 3.3 million shares
Inception Date 09/07/2010
Annualized performance since inception 12.52%

Note that the SEC yield is a standardized metric mandated by the Securities and Exchange Commission (SEC), which provides investors with a common yardstick for comparing the interest earned and dividend yield of various funds.

The Vanguard S&P 500 ETF's Largest Holdings

Listed below are the top 10 holdings of the VOO along with their portfolio weightings, which in total make up 30.4% of the fund's portfolio.

Top 10 Holdings of the Vanguard S&P 500 ETF (VOO)
 Holdings  Percentage
Apple 7.16%
Microsoft 5.79%
Amazon 3.29%
Tesla 2.05%
Alphabet Class A 1.92%
Alphabet Class C 1.79%
Berkshire Hathaway Class B 1.50%
UnitedHealth Group 1.44 %
Johnson & Johnson 1.26 %
Exxon Mobil 1.19%
Data as of Aug. 31, 2022

Equity Sector Diversification

Many funds contain equities from several sectors within the economy. A sector is a large grouping of companies organized by similar business activities, such as a product or service.

For example, the consumer staples sector represents essential goods, such as toilet paper, while the consumer discretionary sector represents nonessential goods, such as luxury items. Below is the weighting of each sector within the Vanguard S&P 500 ETF.

Equity Sector Diversification for the Vanguard S&P 500 ETF (VOO)
 Equity Sector Sector Weighting
Information Technology 27.3%
Health Care 14.1%
Consumer Discretionary 11.4%
Financials 10.9%
Communication Services 8.4%
Industrials 7.9%
Consumer Staples 6.8%
Energy 4.7%
Utilities 3.1%
Real Estate 2.9%
Materials 2.6%
Data as of Aug. 31, 2022

How to Invest in the Vanguard S&P 500 ETF

It is important to remember that shares for ETFs trade just like ordinary stock—meaning you can purchase or sell them anytime during trading hours. You can purchase shares for the Vanguard S&P 500 ETF through your broker-dealer or an investing app such as Robinhood. It is also possible to own fractional shares of the ETF by specifying the purchase amount in dollars.

The majority of broker-dealers and apps do not charge purchase commission fees. However, a surefire way to avoid paying commission fees is to open a brokerage account with the fund provider, Vanguard, on its website. The caveat of such a move is that your portfolio universe may become restricted to products offered by Vanguard unless you open accounts with other firms or providers. Unlike its index funds, Vanguard does not have minimum investment amounts for its ETFs.

Even though you may not end up paying commissions to purchase the stock, there are other expenses baked into the fund's operations. The VOO ETF has annual operating expenses of 0.03%.

There are also fees for portfolio turnover. This means that the fund manager incurs expenses each time they reconstitute the portfolio by buying or selling securities, thereby inflating the overall expenses. The portfolio turnover rate for the fund was 2.3% in 2021. Despite the fees, however, the Vanguard S&P 500 remains one of the cheapest and most accessible ways to invest in the S&P 500.

Vanguard S&P 500 Dividend History and Yields

Here is a breakdown of the quarterly distributions the Vanguard S&P 500 ETF has paid.

VOO Dividend History
 Year/ Dividend Amount 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
2013  --  $0.369  $0.786  $0.914
2014  $0.779  $0.809  $0.876 $1.026 
2015  $0.984  $0.902  $0.953  $1.092
2016  $1.002  $0.953  $0.883  $1.296
2017  $0.998  $1.01  $1.176  $1.184
2018  $1.084  $1.157  $1.207  $1.289
2019  $1.455  $1.386  $1.301  $1.429
2020  $1.178  $1.433  $1.309  $1.383
2021 $1.263 $1.333 $1.308 $1.533
2022 $1.374 $1.4321 $1.469 --

Investors looking for a low-cost, low-maintenance fund that provides them with access to U.S. equity markets might opt for the Vanguard S&P 500 ETF. However, each investor must consider the level of risk they're willing to take when investing—called risk tolerance. Also, how long the money will be invested in the market is important to consider.

What Is the Vanguard S&P 500 ETF?

The Vanguard S&P 500 ETF (VOO) is a fund that invests in the stocks of some of the largest companies in the United States. It tracks and mirrors the performance of the S&P 500 index.

How Many Stocks Are Present in the Vanguard S&P 500 Index ETF?

The Vanguard S&P 500 Index ETF had 503 stocks in its portfolio as of Q3 2022.

Does the Vanguard S&P 500 Index Fund Pay Dividends?

Yes, the Vanguard S&P 500 pays quarterly dividends, and as of July 2022, yielded 1.55%.

Can I Buy Fractional Shares of the Vanguard S&P 500 ETF?

Vanguard does offer the ability to purchase fractional shares for VOO on its platform. But you can purchase fractional shares of the ETF on other investing platforms, such as Schwab and Robinhood.

Will the Vanguard S&P 500 ETF Split?

The Vanguard S&P 500 (VOO) ETF has undergone a split just once in its lifetime. It occurred on Oct. 24, 2013, when its share price was falling. The company conducted a 1-for-2 reverse split, meaning it combined every two shares held by its investors into a single one. The reverse split reduced the number of shares in circulation and doubled the ETF's price. It also reduced the spread of the difference between the buying and selling price of shares for investors.

The Bottom Line

Investing in the Vanguard S&P 500 ETF is a passive investment strategy in which the fund tracks the performance of the S&P 500. In other words, the fund's management team is not actively trading by buying and selling stocks, which helps maintain the lower expense ratio.

Investing in Vanguard's VOO is a low-stress way for investors to access the U.S. equity market. However, there is the risk of loss as with any investment, and investors should consult a financial professional before investing in the Vanguard S&P 500 ETF.

CorrectionSeptember 27, 2022: A previous version of this article incorrectly indicated that TD Ameritrade offers fractional share purchases of ETFs; they do not. However, Schwab has purchased Ameritrade and Schwab does offer this service.

Article Sources
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  2. Vanguard. "Vanguard S&P 500 ETF (VOO), Portfolio & Management."

  3. Nasdaq. "VOO Dividend History."

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