The S&P 500 is within striking distance of a fresh all-time high. Is now a good time to invest?
The Vanguard S&P 500 ETF (VOO -0.29%) is one of the best ways to invest in the S&P 500, which has been a pretty smart strategy over the long term. Since 1965, the S&P 500 has produced a total return of 10.2% annualized. The Vanguard ETF has an expense ratio of just 0.03%, so you get to keep most of your gains.
While there's no guarantee that the S&P 500 will achieve the same level of performance in the future, it has historically produced 9%-10% annualized returns over most multidecade periods. Having said that, the S&P 500 isn't too far from its all-time high (as of this writing), so it's natural for investors to wonder whether now might be a good time to buy shares in an S&P 500 index fund or if it would be smarter to wait for a better opportunity.
Just under an all-time high
The S&P 500 and several other major stock indices have reached all-time highs this year and remain close to record levels. In the case of the S&P 500, the index is less than 3% below its all-time high, as of April 29.
^SPX data by YCharts.
Should you wait for a correction?
One important thing for all investors to learn is that timing the market is impossible. And quite frankly, it's unimportant if you're investing in a high-quality S&P 500 index fund for the long term. Even if you buy at a market peak, your long-term returns should likely be excellent.
For example, let's say you invested in the S&P 500 at its peak in 2007 -- just before the financial crisis sent the market plunging. By the time the S&P 500 bottomed in early 2009, it had lost about 50%. So this would seem like a pretty awful time to invest.
However, you might be surprised to learn that if you had invested in an S&P 500 index fund at the worst possible time before the 2008-2009 financial crisis, you would be sitting on a 355% total return today. If you look at the chart below, the actual 2008-2009 stock market crash barely looks like a blip over the long run. And that's the point.
^SPXTR data by YCharts.
It's also worth noting that just because the S&P 500 is near an all-time high doesn't mean it can't go even higher. Many people were "waiting for a correction" in the 2014-2015 time frame after a long post-financial crisis rally and never got one.
A better strategy
Having said that, the best way to invest in S&P 500 ETFs is a little at a time, not all at once.
One excellent strategy is to invest equal amounts of money at certain intervals. This is known as dollar-cost averaging, and mathematically, it guarantees that you'll buy more shares when prices are lower and fewer shares when prices are high.
As a basic illustration of this, let's say you plan to invest $1,000 in the Vanguard S&P 500 index fund every three months. Right now, the fund is trading for approximately $470 per share, so assuming your broker allows you to buy fractional shares, you'd buy 2.13 shares of the index fund.
Now let's say that a market correction comes, and the share price of the fund falls to $430 by the time you're ready to make another investment. This time, your $1,000 investment will buy 2.33 shares.
The bottom line is that by averaging into a fund like the Vanguard S&P 500 ETF, you're going to get a favorable average share price over time. A strategy like this is a far better way to invest than trying to decide whether to invest a lump sum now or later.
Matt Frankel has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
FAQs
The S&P 500 is less than 3% away from its all-time high, making some investors hesitant to buy an index fund. There's no way to time a correction, and even if you buy at the highs, you'll likely do fine over the long run. Dollar-cost averaging could be a far better strategy, no matter what the market is doing.
What is the prediction for the Vanguard S&P 500? ›
Vanguard 500 stock price stood at $487.25
According to the latest long-term forecast, Vanguard 500 price will hit $500 by the end of 2024 and then $600 by the end of 2025. Vanguard 500 will rise to $700 within the year of 2027, $900 in 2029, $1000 in 2031, $1100 in 2033 and $1200 in 2035.
What is the outlook for Vanguard S&P 500 ETF? ›
VOO 12 Month Forecast
Based on 505 Wall Street analysts offering 12 month price targets to VOO holdings in the last 3 months. The average price target is $536.16 with a high forecast of $631.22 and a low forecast of $441.23. The average price target represents a 11.99% change from the last price of $478.74.
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Should I buy ETF when market is down? ›
If the market falls, a passively managed ETF will generally follow it down. You can find actively managed ETFs, in which fund managers actively buy and sell securities in the hope of beating an index benchmark (though most aren't able to do so consistently). But such funds aren't as common.
Is Vanguard S&P 500 ETF a good investment? ›
It might rise 20% one year and fall 15% the next. But long term, the S&P 500 has historically appreciated at an average annualized rate of 10%. That means that an investment in it would double every seven years, on average. The Vanguard S&P 500 ETF is designed to mimic the index's composition and investment returns.
Is Vanguard S&P worth it? ›
The Vanguard ETF has an expense ratio of just 0.03%, so you get to keep most of your gains. While there's no guarantee that the S&P 500 will achieve the same level of performance in the future, it has historically produced 9%-10% annualized returns over most multidecade periods.
What is the best S&P 500 index fund on Vanguard? ›
Top S&P 500 index funds in 2024
| Fund (ticker) | 5-year annual returns | Expense ratio |
|---|
| Vanguard S&P 500 ETF (VOO) | 14.5% | 0.03% |
| SPDR S&P 500 ETF Trust (SPY) | 14.5% | 0.095% |
| iShares Core S&P 500 ETF (IVV) | 14.5% | 0.03% |
| Schwab S&P 500 Index (SWPPX) | 14.5% | 0.02% |
4 more rowsApr 5, 2024
Its low expense ratio and tight index tracking make it a top choice for anyone looking to match the returns of the S&P 500. Last year, the exchange-traded fund produced a total return of 26.3%. But more than half of those returns came from just seven stocks, dubbed the "Magnificent Seven."
What is the average annual return for the Vanguard S&P 500 ETF? ›
Vanguard S&P 500 (VOO): Historical Returns
In the last 30 Years, the Vanguard S&P 500 (VOO) ETF obtained a 10.36% compound annual return, with a 15.12% standard deviation.
See the 10 stocks
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Are ETFs safe if the stock market crashes? ›
Market risk
The single biggest risk in ETFs is market risk. Like a mutual fund or a closed-end fund, ETFs are only an investment vehicle—a wrapper for their underlying investment. So if you buy an S&P 500 ETF and the S&P 500 goes down 50%, nothing about how cheap, tax efficient, or transparent an ETF is will help you.
Should I invest money now or wait? ›
The key to long-term investing success
So rather than waiting for the ideal time to invest, it's often better to buy now and hold your investments for the long term. Even if you invest at the "wrong" time, it can still pay off over time. For example, say you invested in an S&P 500 index fund in October 2021.
Why I don't invest in ETFs? ›
Commissions and Expenses
Every time you buy or sell a stock, you might pay a commission. This is also the case when it comes to buying and selling ETFs. Depending on how often you trade an ETF, trading fees can quickly add up and reduce your investment's performance.
What is the S&P 500 index forecast for 2025? ›
The analysts also hiked their 2025 earnings estimate for the S&P 500 to $270 from $250, and said they see a forward price-to-earnings multiple of 20.5 times for the index - citing improving U.S. economic growth and "superior margin expansion" from higher-margin stocks in the information-technology XX:SP500.
What is the S&P 500 forecast for 2025? ›
Mike Wilson, Morgan Stanley's chief U.S. equity strategist, said he sees the S&P 500 climbing to 5,400 by the second quarter of 2025.
How much will the S&P 500 be worth in 2030? ›
Stock market forecast for the next decade
| Year | Price |
|---|
| 2027 | 6200 |
| 2028 | 6725 |
| 2029 | 7300 |
| 2030 | 8900 |
5 more rowsApr 26, 2024
According to the latest long-term forecast, Vanguard Total Fund VTI price will hit $300 by the end of 2025 and then $350 by the middle of 2027.
