ETF of the Week: Vanguard S&P 500 ETF 'VOO'

Lydon explains that the fund is one of the largest on the market, currently with around $500 billion in assets, and it provides exposure to the S&P 500 for only three basis points.

“Just this week, with the recent rebound, VOO has gone back above its 200-day average,” Lydon says. “When the S&P 500 goes above its 200-day average, that’s fairly notable; we’ve had a little bit of a correction, and sure enough a bit of a snapback here, which is positive for the market, positive for technicians and trend followers.”

VOO has experienced $26 billion of inflows in 2022 as investors continue to put their money to work in the midst of geopolitical tensions, inflationary pressures, and interest rate hikes. It remains a staple allocation for many investors, and passive investment into the index continues to outperform active.

“One important point: At the beginning of the year, the S&P 500 had a P/E of 26. It’s now dipped below 20 with less than three months into the year, so you’ve got a bit of a discount if you’re buying those S&P 500 stocks today,” Lydon says.

This kind of fund meets the needs of all investors, whether they are looking for passive investment into the index over prolonged periods of time and can enjoy the tax benefits VOO offers, or if they are trend followers or traders seeking to invest according to moving averages and move into and out of the fund over time.

Investors into the S&P 500 for the last 10 years have largely done very well, and with current concerns over rising rates and inflation leading more active investors to seek funds to help control volatility, VOO is an option that could provide just that for a portfolio, Lydon explains.

“In a rising rate environment and an inflationary environment, it’s really tough for the bond market, so a lot of advisors, a lot of investors are actually moving money out of non-productive areas like cash or fixed income or bond funds into something that maybe they feel has a chance for further growth over the next five to 10 years,” Lydon says.

“If you happen to have some money on the sidelines, and long-term you’re bullish on U.S. stocks, this is definitely something to consider,” Lydon explains.

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