Is the Vanguard 500 Index Fund ETF a Buy Now?

If you've been looking around for a good place to invest some of your long-term dollars, it's hard to beat the S&P 500 -- which you can invest in via a low-fee exchange-traded fund (ETF) such as the Vanguard S&P 500 ETF (NYSEMKT: VOO). (ETFs are funds that trade like stocks, so it's very easy to invest in them via an account at any good brokerage.)

The Vanguard ETF sports an ultra-low expense ratio (annual fee) of just 0.03%, meaning you'll pay $3 each year for every $10,000 you have invested in it. Here's a closer look at the ETF and why you might want to invest in it.

Image source: Getty Images.

Meet the S&P 500

Any S&P 500 index fund will be aiming to roughly duplicate the performance of the S&P 500 by owning most or all of the same companies, in roughly the same proportion. (Every index fund tracks some index of securities.) The S&P 500 is an index of 500 of America's biggest companies. Together, they make up about 80% of the total value of the U.S. stock market. Here are the recent top 10 holdings in the S&P 500:

Data source: Slickcharts.com.

Remember, of course, that there are 490 other stocks in the index, such as Netflix (recently ranked at No. 14), Nike (No. 139), General Motors (No. 206), Hershey (No. 306), Best Buy (No. 421), and Campbell's (No. 488). When it comes to sectors, here are the ETF's top weightings:

Data source: Morningstar.com, as of March 31, 2025.

That means that any money you invest in an S&P 500 index fund will largely be in technology-oriented companies, along with financial services and healthcare companies.

How can your money grow in the S&P 500?

The S&P 500 has been a powerful grower over many decades, averaging annual gains close to 10% (not including inflation). Here are the index's average annual gains over some recent periods:

Data source: S&P Global, as of May 1, 2025.

Remember that there are few guarantees in the stock market, and the S&P 500 could do even better -- or worse -- than the growth rates above during your particular investing period. If we assume an average annual gain of 8%, here's how your money might grow in an S&P 500 index fund such as the Vanguard S&P 500 ETF:

Calculations by author.

With enough time, you might become a millionaire -- simply by investing meaningful sums regularly in a low-fee S&P 500 index fund.

Should you invest in the S&P 500 now?

Given all that, should you invest in the S&P 500 now? Well, only do so if you're comfortable with the idea. If you're not, perhaps read more about the index and much more about investing in general. Read up on recent economic news, too -- because there's reason to worry about a recession occurring in the near future (though that's not guaranteed). Here are some questions to ask:

• Are you bullish on the long-term prospects for the American economy?
• Can you stomach volatility? (The stock market can be volatile, after all.)
• How long do you plan to keep your money invested?

Depending on the answers to those questions, you might plunk a lot of dollars into the Vanguard S&P 500 ETF right now -- or you might buy into it incrementally, adding a certain sum every few months. Shorter-term money that you might need within five, if not 10, years might be parked in a money market account or other safer places for cash.

The Vanguard S&P 500 is an excellent way to save and invest for your future, so consider it for your retirement plan.

Should you invest $1,000 in Vanguard S&P 500 ETF right now?

Before you buy stock in Vanguard S&P 500 ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard S&P 500 ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $611,589!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $697,613!*

Now, it’s worth noting Stock Advisor’s total average return is 894% — a market-crushing outperformance compared to 163% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 5, 2025

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Selena Maranjian has positions in Alphabet, Amazon, Apple, Berkshire Hathaway, Broadcom, Meta Platforms, Microsoft, Netflix, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Best Buy, Hershey, Meta Platforms, Microsoft, Netflix, Nike, Nvidia, Tesla, and Vanguard S&P 500 ETF. The Motley Fool recommends Broadcom, Campbell's, and General Motors and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.