You probably get lost in all these S&P 500 Index Fund ETF’s like VOO, IVV, SPY and VUSD.
In this guide you will learn which one is the best for you. I should warn you to stay away from Mutual Funds offerings as Index Funds. Mutual Funds always cost you more. The most efficient way of investing in the top 500 US companies is to buy Index Fund ETFs.
How to choose between the Index Funds ETFs?
The most popular index funds track indices such as S&P 500, FTSE 100, DAX, Nasdaq and Dow Jones Industrial Average. You should look in to each indexes past performance for a long time period.
The reasons why I choose to invest in S&P500?
- Proven past performance: 10% annualized return
- Diversified sectors : Information Technology, Health Care, Financials, Consumer Discretionary, Communication Services, Industrials, Consumer Staples, Energy, Utilities, Real Estate, and Materials.
- Global Exposure : Companies like Microsoft, Amazon, Facebook, Netflix, Visa, Mastercard all have global operations. While S&P500 companies are US listed, companies have a great exposure to international markets.
Once you decided to invest S&P500 Index, which ETF gives you the most return? If not sure how to start with your investment then read this page first.
Top 20 Companies Listed in S&P500
|Market Cap ($M)||Index Weight|
|1) Microsoft (MSFT)||1,324,517.03||5.66%|
|2) Apple (AAPL)||1,239,179.70||5.02%|
|3) Amazon (AMZN)||1,184,495.45||4.27%|
|4) Alphabet Class C (GOOG)||875,354.44||1.94%|
|5) Alphabet Class A (GOOGL)||873,868.94||1.73%|
|6) Facebook (FB)||534,635.90||1.63%|
|7) Berkshire Hathaway||455,302.94||1.63%|
|8) Johnson & Johnson (JNJ)||406,367.34||1.55%|
|9) Visa (V)||380,380.40||1.26%|
|10) Procter & Gamble (PG)||290,689.96||1.22%|
|11) JPMorgan (JPM)||287,684.50||1.21%|
|12) UnitedHealth (UNH)||278,884.37||1.17%|
|13) Mastercard (MA)||266,474.49||1.10%|
|14) Intel (INTC)||251,880.66||1.02%|
|15) Verizon (VZ)||239,209.20||0.98%|
|16) Home Depot (HD)||233,845.82||0.98%|
|17) AT&T (T)||217,597.50||0.92%|
|18) Pfizer (PFE)||212,197.20||0.88%|
|19) Merck (MRK)||212,132.53||0.88%|
|20) PepsiCo (PEP)||186,964.05||0.80%|
Also bear in mind these companies are profitable ones so they pay dividends for shareholders. When you invest in the Index Fund you receive quarterly dividends. The dividend payout ratio is around 2% annually.
Historical Return of S&P500 Index
Since 1926 S&P500 has a CAGR (compound annualised growth rate) of 10%. Source
The performance of index fund investing is also explained in this legendary book “Random Walk Down Wall Street”
|Assets Under Management||$262 bn||$119 bn||$185 bn||$24 bn|
Choose VOO if you are a long term investor BUY and HOLD type.
Choose SPY if you are a day trader or looking for liquidity in Options/Stocks.
Choose VUSD if you are an European and want to pay less Witholding Tax. See a comparison of VOO vs VUSD here.
In some countries you may invest directly with Vanguard without a broker. That could be advantageous too.
You should not put all your life savings blindly in to Index Funds. It is better to diversify and search for some other investment tools that can beat 10% annual Index Fund returns. Check out my pages below;
- Weekly Stock Picking Strategy powered by Zacks aka The Money Making Machine
- Emerging Market Government Bonds with 10% annualized passive income.