I’ve talked about investing in the US stock market a lot. And in my previous posts, I’ve mentioned how the US stock market has an average annual return of 10%.
The question is how should you invest to be able to get that 10% average annual growth? In order for you to do so, you need to invest at least in all the companies listed in the S&P 500 or in all companies listed on the NYSE and it has to be on a specific allocation. Tough, right?
Well, the answer to this is investing in an index fund or ETF that tracks the S&P 500 index and that’s where VOO comes in.
Please take note that VOO is just one of the several ETFs that track the S&P 500 index. But for this particular post, I’ll be discussing VOO since that’s what I have in my portfolio.
What is VOO?
VOO is an exchange-traded fund managed by Vanguard, one of the world’s largest investment management companies. It aims to track the performance of the S&P 500 index, which represents the 500 largest publicly traded companies in the United States.
Benefits of Investing in VOO
Diversification
VOO offers investors exposure to a wide range of sectors and industries through its holdings in the S&P 500 index. This diversification can help mitigate risk by spreading investments across multiple companies.
Instead of you having to buy individual stocks from the top 500 companies with the correct allocation to exactly mirror the S&P 500 performance, VOO already does that for you.
Low Expense Ratio
Vanguard is known for its commitment to providing cost-effective investment options, and VOO is no exception. With an expense ratio significantly lower than many mutual funds, VOO offers investors a cost-efficient way to gain exposure to the U.S. stock market. The expense ratio for VOO is 0.03%.
In case you’re wondering, the “expense ratio” represents the annual fees and expenses charged by the fund management company to operate and manage the fund. It is expressed as a percentage of the fund’s total assets and is deducted from the fund’s returns.
To make it simpler, for every 1000 USD you invest in VOO, you are paying USD$ 0.3 per year to Vanguard as a management fee. This is a very low fee compared to other securities like Mutual Funds and VUL. In the Philippines, the average expense ratio for VUL is 1 – 3% and could even be higher.
What is the YTD return of VOO?
As of this post (June 25, 2023), the year-to-date return of VOO is at 14.2%.
So how do you invest in VOO if you’re in the Philippines?
What I personally use is eToro. When I decided to invest in the US stock market, I had a hard time looking for one that was easy to join and doesn’t require too many documents. Hence, I ended up using eToro.
That said there are a lot of other trading platforms that allow Filipinos to get exposure to the US stock market, you just have to do your own research.
Kuro-kuro ni Kuya Well
If you have been following my blog, aside from VOO, I also buy 2 other ETFs and 8 individual stocks. Checking my current eToro stock portfolio, my YTD performance is at 10.14% which is lower than that of VOO alone. Isipin mo na lang kung all-in ako sa VOO, I could have gotten 4% more.
By the way, expect me to post more on the stocks and ETFs that I’m investing in. This is to give you a bit of a background on the said stocks/ETFs.