As Vanguard’s flagship ETF, VOO clocks in at a razor-thin 0.03% expense ratio every year. The Vanguard Group prides itself on keeping costs extremely low. If rock-bottom expenses are what you are looking for, then the Vanguard S&P 500 ETF is totally your bag, baby! Many ETF investors are attracted to them specifically because of their extremely low costs. Related: SPY vs VTI - What's the Difference? Expenses But these changes normally occur to the smaller end of the S&P 500, where each individual stock has only a tiny impact on the weighting. When companies fall out of the top 500 biggest market capitalizations in the country, and new stocks are promoted to the S&P 500 as they grow in value, one fund may be quicker to sell the old companies and buy the new ones. There may be some minor portfolio differences in the few days after Standard & Poor’s announces a change in the Index makeup. There will be no significant differences in their sector weightings, dividend yield, price to earnings ratios, or any of their holdings. stocks, both SPY and VOO will have almost exactly the same portfolio at any given time. Portfoliosīecause they both track the exact same index of large-cap U.S. Furthermore, studies also show that the mutual fund managers who do beat the index in any given year cannot be reliably identified in advance. Many studies have shown that trying to pick individual stocks is a fool’s errand for most: In most years, a solid majority of professional mutual fund managers fail to beat the investment returns of a closely-related unmanaged index by at least the amount of their costs. Typically, ETF expense ratios range from as low as 0.03% to 0.1% for most commonly-traded indexes.Įxchange-traded funds are very popular among indexers and fans of passive management. ETFs are useful because they enable ordinary investors to gain instant diversification across hundreds of different stocks with a single transaction - at an extremely low cost.
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