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Yahoo
8 hours ago
- Business
- Yahoo
Is the Vanguard S&P 500 ETF Index Fund a Buy Now?
The Vanguard S&P 500 ETF remains one of the best ways to match American stock market returns with minimal fees. June 2025 may or may not be a great time to invest in the stock market, but you might as well get started. The biggest investment mistake is staying out of the market forever while waiting for ideal conditions that may never arrive. 10 stocks we like better than Vanguard S&P 500 ETF › The Vanguard S&P 500 ETF (NYSEMKT: VOO) is arguably the best way to match the returns of the American stock market. It's one of the three largest exchange-traded funds (ETFs) based on the popular S&P 500 (SNPINDEX: ^GSPC) market index, which reflects the performance of 500 top-quality domestic companies. The fund's annual fees are minimal. The Vanguard group behind the scenes was built around the investor-friendly policies of founder John Bogle. If you want to follow the broader market, the Vanguard S&P 500 ETF is always a great place to start. But there's a more general question in play here. Is this the time to get into the stock market, in the first place? Let me show you why the answer is "yes," no matter what you think the stock market might do in 2025 or over the next couple of years. You may not want to go all-in with a large purchase today, but this moment is as good as any other to start a new Vanguard S&P 500 ETF position -- slowly. First and foremost, I can't tell you exactly what the stock will do over the summer of 2025. There are tons of conflicting opinions on this matter -- probably more than usual. Hedge funds are reportedly buying lots of promising tech stocks right now, suggesting a bullish market outlook in this group. At the same time, bearish short-selling activity is on the rise and many market watchers expect a full-fledged recession amid the Trump administration's unpredictable tariffs. So the stock market might be falling off a cliff, or preparing for a majestic surge. The real outcome probably lies between these extremes. Trying to time the market in this erratic economy sounds like a terrible idea. In all fairness, the starting price for any investment can make a significant difference to your long-term results. If you invested $3,000 in an S&P 500 index fund at the start of 2008, you'd have a total return of $16,970 by June 2, 2025. But if you saw stocks trading at unreasonable valuations at back then, and held off on making that $3,000 investment until early 2009 instead, your account would show a total return of $26,940 instead. The S&P 500 dipped as much as 48% lower in the subprime mortgage crisis. It's still a game-changing over 17 or 18 years, but of course I'd rather have a compound annual growth rate (CAGR) of 14.3% than 10.5%. Most people didn't see that crash coming, though. Trading volumes soared when the Lehman Bros. firm went out of business, but cooled down as the financial meltdown continued. In a perfect world, more investors would be eager to buy great stocks at temporary discounts, thereby boosting the daily trading volumes. The opposite scenario unfolded instead. And most people will mistime the next economywide market crash, too. It's one thing if you really do see clear signs of some unavoidable market trend, like the soaring home prices of the early 2000s or the skyrocketing average price-to-earnings ratios just before the dot-com bubble popped. It's fine to keep your cash on Wall Street's sidelines when you expect a downturn fairly soon. Otherwise, you should consider putting your money to work over time. Buying in thirds is one simple approach to unpredictable markets. Divide your investable cash in three equal buckets (metaphorically speaking, of course). Then you buy your favorite asset in three equal portions, stoically looking away from the price charts to place those pre-planned trades no matter what. The three portions may be a month apart, or a year, or any other schedule that makes sense in your situation. The important part is that you make a plan that works with your budget, and you stick to it whether stock prices go up or down in the meantime. Let's say you used this method around the subprime mortgage panic of 2008, starting at the beginning of that year with a six-month pause between your Vanguard S&P 500 ETF purchases. This is how the three buys would have worked out in the long run: Date of ETF Purchase Original Investment Total Return By 6/2/2025 1/1/2008 $1,000 $5,658 7/1/2008 $1,000 $6,398 1/1/2009 $1,000 $8,981 Total Results $3,000 $21,037 Calculated from YCharts data on 6/2/2025. As expected, these hypothetical returns would fall short of a single perfectly timed buy-the-dip purchase, but they're also much better than the worst-case scenario of making a big buy just before a terrible market drop. The CAGR for this thought experiment would be roughly 12.1%. Maybe you already have a solid investing strategy in mind. Congratulations -- you're ahead of the game and should continue with your chosen plan. Don't be distracted by blaring headlines along the way, but feel free to take advantage of unexpected opportunities. Perfection is the enemy of progress, especially on Wall Street. The worst thing you can do is stay out of the market forever, waiting for an ideal buy-in price that might never come. If you're just getting started, don't worry about placing your first trade on the perfect day. Almost nobody does that, and it's honestly just the luck of the draw. Just set your budget, pick a three-part timing schedule that works for you, and invest the reserved cash in Vanguard S&P 500 ETF shares on those dates. 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 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 $656,825!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $865,550!* Now, it's worth noting Stock Advisor's total average return is 994% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 2, 2025 Anders Bylund 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. Is the Vanguard S&P 500 ETF Index Fund a Buy Now? was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
16-03-2025
- Business
- Yahoo
3 proven strategies to help build generational wealth in the stock market
The stock market has long been a powerful tool for building wealth over time. Indeed, by starting early and following smart investment principles, an individual could create a lasting financial legacy for future generations. Here are three market strategies that could help secure financial freedom. Passive investing is where someone invests in index funds that track the overall market rather than picking individual stocks. This is a simple, hands-off way to steadily grow wealth. John Bogle was the pioneer of index fund investing. He argued that 'the winning formula for success in investing is owning the entire stock market through an index fund, and then doing nothing. Just stay the course'. While this approach might sound boring, it's proven its worth. Someone who invested £25,000 in the S&P 500 index 30 years ago would now have over £300,000, adjusted for exchange rate changes. Admittedly, we don't know what returns this index will produce in future. But if it returns just 7.5% with dividends (rather than 9-10%), then £300,000 would become £1m inside another 17 years. If this person invested £400 a month on top of the initial £25k across these 47 years, they'd end up with almost £3.2m! This calculation assumes an average 8% return. Investors could also diversify beyond US stocks and consider ETFs that track the UK's FTSE 100 and Europe's STOXX 600. Next, there's dividend investing. This involves actively picking stocks that pay out dividends. Now, this approach is more risky because things can go wrong at individual companies and dividends are never guranteed. However, it also has the possibility of turbocharging the compounding process when high-yield dividends are reinvested. Let's use British American Tobacco (LSE: BATS) as an example. This dividend stock offers a 7.5% yield, which is well above the FTSE 100 average (currently around 3.4%). Operating in over 180 countries, the firm owns cigarette brands such as Dunhill and Lucky Strike. While smoking is in overall decline, the firm's also seeing growth in next-generation products, with brands like Vuse (vaping), Glo (heated tobacco), and Velo (oral nicotine). Of course, falling cigarette sales presents risk. Projections suggest the number of smokers worldwide could fall to 1bn by 2040, down from 1.3bn in 2021. However, that's still a massive market, and the firm continues to make enough profit to pay high-yield dividends. Putting £5k into the stock should make £375 in dividends after one year. After 20 years, assuming the same yield, share price and reinvested dividends, the investment would grow to £21,240. At that point, the yearly passive income would be around £1,600. This approach requires the building of a diverse portfolio of income stocks. But it has serious wealth-building potential. Finally, there's growth investing, which has the potential for blockbuster returns. Just consider the 15-year returns of the five well-known stocks below. Admittedly I've cherry-picked them, but owning just one across this time would have lit up an investor's portfolio. 15-year share price return* Nvidia 26,800% Tesla 18,700% Netflix 8,750% Amazon 2,840% Apple 2,490% This approach is high-risk, high-reward though because growth companies that suddenly stop growing can quickly unravel. However, investing £800 a month in growth stocks that collectively average 12% would build a £1m portfolio in just under 23 years starting from scratch. It would take a lot longer with lower percentage returns, but it does show what could be achieved. The post 3 proven strategies to help build generational wealth in the stock market appeared first on The Motley Fool UK. More reading 5 Stocks For Trying To Build Wealth After 50 One Top Growth Stock from the Motley Fool John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Ben McPoland has positions in British American Tobacco P.l.c. The Motley Fool UK has recommended Amazon, Apple, British American Tobacco P.l.c., Nvidia, and Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Motley Fool UK 2025
Los Angeles Times
06-03-2025
- Business
- Los Angeles Times
The results are in: During 2024, actively managed mutual funds again stank
Ordinary stock market investors — you and me, that is, not the big pension funds and other institutions — have two main choices about where to put their money: actively managed mutual funds run by stock pickers claiming to know the magic incantations for finding the best stocks, or passively managed index funds that merely replicate the markets themselves. Which category performs better? Easy question. It's index investing, which has smoked the active managers virtually since it was popularized by John Bogle and his Vanguard Group in the mid-1970s. The latest tally shows that 65% of actively managed U.S. large-capitalization mutual funds fell short of the benchmark S&P 500 stock index in 2024. That's worse than the 60% of funds that underperformed the benchmark in 2023, and a hair worse than the average rate over the last quarter-century. Those dismal statistics come to us via the latest annual SPIVA scorecard (the acronym stands for Standard and Poor's Index vs. Active). First published in 2002, the scorecard serves as what S&P asserts to be 'the de facto scorekeeper of the long-standing active versus passive debate.' That's accurate, up to a point. The debate isn't really about whether index funds perform better than actively managed funds — that debate is essentially over, and indexing wins, hands down. For years, the debate has been more about whether there are aspects of indexing that are bad for the markets, meaning the process of capital allocation. The virtues of index investing for the ordinary investor are indisputable. As financial planning guru Barry Ritholtz lists them in his forthcoming book 'How Not to Invest' (emphasis his), they include, aside from superior long-term performance, lower transaction costs and taxes, simplicity and fewer opportunities for bad behavior through silly mistakes. It's common for retail investors to buy high (say, when they catch the euphoria of a market surge) and sell low (say, when they're rattled by a market downturn), reversing the goal of buying low and selling high. 'Indexing gives you a better chance to 'be less stupid,'' Ritholtz advises. The majority of retail investors seem to have taken these points on board. By year-end 2023, according to Morningstar, assets under management at index funds had outpaced those in actively managed funds, $13.29 trillion versus $13.23 trillion. Back in 1993, when Morningstar first began tracking index-versus-active assets, active funds had $1.25 trillion under management, index funds a mere $21 billion. Before indexing took flight, it was easier to become enthralled by the records of such legendary stock pickers as Warren Buffett, John Templeton and Fidelity's Peter Lynch, and harder to notice that the vast majority of active managers turned in a few years of outsize returns, but that almost always their performances reverted to the mean, or worse. Even Lynch's prowess as a world-beating stock-picker was overstated. From 1977 to 1990, he built Fidelity's Magellan Fund from $18 million in assets to $14 billion, averaging an annual return of 29%, possibly the most successful such run ever. But it's often forgotten that for the first four years of his management, Magellan was a private investment fund for Fidelity's founding Johnson family. It wasn't opened to outsiders until 1981. By the end of Lynch's run Magellan was a behemoth struggling to eke out 'a razor thin margin of victory,' as investment commentator William Bernstein put it. Magellan actually fell behind the S&P 500 in two of Lynch's final four years of management. Among all U.S. actively managed stock funds, SPIVA reported last year, fewer than 5% of those that were in the top half one year were 'still in that position four years later.' Those who allowed their brokers to steer them into and out of individual stocks incurred commissions (on both ends of their trades) and taxes, especially on securities that they held for less than a year and therefore couldn't even claim the lower tax rates on long-term capital gains. Because index funds buy and sell stocks only when they're admitted into or dropped from their benchmark index, which happens relatively rarely, they minimize commissions and taxes. They also obviate the emotional component of investing, which so often can lead ordinary investors astray. The investment method people choose often depends on whether they see investing chiefly as a means to grow wealth or a way to get their gambling jollies as an alternative to going to the closest casino. Consider this example: Those who invested in a S&P 500 index fund at the beginning of January 2021 and held on through the end of 2024 scored a return averaging 13.6% a year; every dollar they invested grew to $1.67 over that timespan. By contrast, many of those who piled into the GameStop meme stock frenzy of January 2021 were down by as much as about 90% within days of the stock's peak, which was nearly $500. If they hung on through the end of 2024, they were still down by more than 60%. In other words, every dollar they invested shrank to less than 40 cents. That experience evokes a famous observation attributed to economist Paul Samuelson: 'Investing should be dull. It shouldn't be exciting. Investing should be more like watching paint dry or grass grow. If you want excitement, take $800 and go to Las Vegas.' Success, however, has bred a backlash. As I've written in the past, concerns about indexing stretch across the partisan spectrum. Democrats and progressives are uneasy about the concentration of investment power in the hands of a few fund management firms that vacuum the vast bulk of investment dollars into their index funds, notably BlackRock, Vanguard and State Street. Republicans and conservatives express a narrower concern — they grouse that passive fund managers push a liberal agenda on corporate managements, especially in 'ESG' categories, the environment, social issues and corporate governance. Specifically, they've been exercised over the managers' asking their portfolio companies to assess the long-term financial implications of global warming. These are 'political' and 'non-financial' goals, 21 red-state attorneys general asserted in a nasty letter to index fund asset managers in March 2023. Never mind that the ramifications of global warming have become only more evident in many of these politicians' states over the last year or two, or that shareholders of some companies voted to urge their managements to pay attention to exactly these ramifications even before the red states asserted that they were irrelevant to corporate planning. Other issues related to the concentration of corporate ownership in the hands of a small cadre of fund managers have arisen. The 'Big Three' index managers — Vanguard, BlackRock and State Street — combined are the largest shareholder at 96% of the largest 250 publicly traded companies in the United States, according to a 2020 analysis. That study also documented that, 'on average, the Big Three control 20.1% of shares at these companies.' What unnerves investment experts about all this is that index fund investors squeeze passivity to the limit — they don't take pains to know what companies are actually in their funds' portfolios or how those individual companies are faring. They just follow how the index is doing. Another theory holds that the natural dynamic through which shareholders pressure their companies to compete better is destroyed when every major company in an industry is in the same index. In those cases, it's argued, the index fund managers don't care for one of their owned companies to compete with others they own in the same field. Whether that has had the projected effect is uncertain; reams of law-review pages and financial analyses have been filled with conjecture, but it's hard to nail down the effect. For all that, it doesn't seem likely that index fund investing will lose its allure for the investing public any time soon. Investing in individual stocks can be a full-time job, and most people have other full-time jobs. They can outsource their investing choices to active managers who all claim to have a unique skill, or cast their lot with passive managers who follow the indices but almost invariably outperform the stock pickers. Why would anyone act differently?
