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VIDEO: ETF of the Week: VOO

BY | ETF Database
12/02/2024 | 184 VIEWS
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  • VOO
On this episode of the “ETF of the Week” podcast, VettaFi’s Head of Research Todd Rosenbluth discussed the Vanguard S&P 500 ETF (VOO A) with Chuck Jaffe of Money Life. The pair discussed several topics related to the fund to give investors a deeper understanding of the ETF overall.Chuck Jaffe: One fund, on point for today. The expert to talk about it. Welcome to the ETF of the Week. Yes, this is the ETF of the Week, where we get the latest take from Todd Rosenbluth, the head of research at VettaFi. And if you go to VettaFi.com, you’ll find all the tools you need to be a savvier, smarter ETF investor. And to get more details on the new, newsworthy, trending, and timely ETFs that we discuss here. Todd Rosenbluth, it’s great to chat with you again. Todd Rosenbluth: Happy Thanksgiving, Chuck! Chuck Jaffe: And to you, too! And I promised last week we wouldn’t have any turkeys this week.  So, your ETF of the Week is… Todd Rosenbluth: The Vanguard S&P 500 ETF (VOO). Chuck Jaffe: The classic! The Vanguard S&P 500 ETF. The VOO, and definitely not a turkey. But I got to tell you, I’m a little surprised by this one. A week ago, you were doing the S&P 500 Equal Weight Income Advantage (RSPA), which yeah, they’re both based around the same index, but they couldn’t be more different. So last week, you were extolling the virtues of equal weighting and getting an income protection rider. Why, this week, are we going with the classic? Todd Rosenbluth: So, Chuck, listen. The investors have spoken! VOO, the Vanguard 500 ETF, as we’re recording this, is roughly $100 billion of net inflows itself. $100 billion for one ETF. The record for ETF inflows for one ETF was actually a Vanguard ETF. And it’s about doubled that. So I’m thankful that many investors are entering the ETF marketplace, getting exposure. And they’re getting exposure with a broadly diversified, low-cost ETF like the Vanguard 500 ETF. So this is about bringing people together. This is about telling the story. And why? Vanguard 500. it’s just quite popular. We’ve got to talk about it. Chuck Jaffe: One of the things that I tell people all the time is, it’s easy to pick your first fund, but the minute you want to pick your second fund and start to build a portfolio, it becomes tougher. So I would never argue with the person who said, “Hey, I want to buy my first fund. What should it be?” It is the VOO, the Vanguard S&P Index 500, great fund. But once you start building a portfolio and building around it, I mean, it is a great fund, but it’s also the trading vehicle of the S&P 500 is of all the institutions and the rest. Is it still your great, make-it-the-base-of-your-portfolio kind of fund? Todd Rosenbluth: It is. So this is an ETF that launched in 2010. You always do a kick off with new ETFs. We did one last week. Newsworthy? Well, the newsworthy aspect of this is, it’s got roughly $100 billion that flowed in this year alone, which is tremendous. It is the core of many people’s portfolios, and for good reason. You get broad market exposure. You’re tilted a little bit more towards the information technology sector, because that’s where Apple and Microsoft and Nvidia reside. But you have exposure to other large cap stocks in consumer discretionary, communication services, but also financials, industrials. I could go on and list all 11 sectors. But we’ve got a turkey to eat soon. So, this is a great building block for a portfolio. The other weeks, we’re talking about ways you can complement that. Whether that’s adding income, whether that’s tilting towards sectors or industries. There’s fixed income exposure, active management. There’s lots of great ways, but it’s important to just start with the core, make sure you understand what you’re getting and be happy with what you’re getting. If you have long been in actively managed mutual funds, Vanguard 500 is a great place to move in to the ETF world, and can serve as a core for many parts of the portfolio. Chuck Jaffe: How big a portion of a portfolio would you let this be? Because if you’re a core and explore, this is core all the way. There was a guest on Money Life recently who was talking about how, because the S&P 500 has been so good, investors have not been fully diversified. So for you, knowing that it’s still an individual decision, how much of anybody’s portfolio would you let any fund — even one is central as this is, to most people’s investment outlook and proper for their portfolios… How much would you let it be? Todd Rosenbluth: So let me address what you were saying. You know, this is an ETF that’s up more than 20% this year. Maybe even higher, as people are listening to it. I hope the market has climbed higher as we head through the rest of November. It has done better than your small-cap strategy. It’s done better than your international strategy. And so, it’s taking a larger slice of the overall portfolio. Many people tend to have a 60/40 portfolio, 60% being equity, 40% being fixed income. A good chunk, probably two thirds of that should be U.S. stocks, with some exposure to international. You should have midcap or small-cap exposure. So, Vanguard 500 can be the largest individual ETF holding that you have in a portfolio. But you should have diversification if you can. Vanguard themselves has exposure — has offered ETFs that are small cap in nature. The Vanguard Small Cap ETF (VB) is a small cap ETF. Vanguard has a developed international ETF, the Vanguard FTSE Developed Markets ETF (VEA) and an emerging markets ETF, the Vanguard FTSE Emerging Markets ETF (VWO). So you could build a well-diversified portfolio using Vanguard ETFs. And of course they have sister or complementary products from iShares, from State Street, from Invesco, from others, to round out the portfolio. Chuck Jaffe: Why use the VOO instead of the SPDR S&P 500 ETF Trust (SPY)? Todd Rosenbluth: So you’re right, those are two very large, widely held S&P 500 ETFs that have the identical holdings. What’s different about VOO versus SPY is the expense ratio. The expense ratio for VOO is just 0.03%, which is a third of the price. SPY’s expense ratio is 0.09%. I’m rounding here. It’s slightly higher than that. So if you are a buy and hold investor, or even strategic where you might tilt up and down, that expense ratio is going to matter more. The ETF trades quite well and quite often with reasonably tight spreads. If you’re a retail or a moderately sized advisor, use this as your core and tilted portfolio versus SPY. So, SPY came first. Vanguard 500 was not that long after. It was after it, but not that much longer after. And it’s been gaining scale in size and is now, I believe, the second largest ETF overall. So, two good products, two different use cases. But VOO is our ETF of the Week. Chuck Jaffe: And speaking of use cases, I just want to ask a question, because some people will take a look. We’re here — we are at Thanksgiving, and some people will look at other types of of traditional meals. And one of those things might involve Acorns, if you’re thinking about it. And programs like Acorns, which is a savings program, have tied themselves in some cases to the S&P 500, which is great if you’re saving long term. But, is this one of those cases where — look at how much the S&P is moving. If you need this money quickly, as much as this is the classic core holding, your core is not where you’re dipping into cash the next time you need it. Todd Rosenbluth:  No, this should be a long term holding for you if you have this as your core. But ETFs are liquid. This is not a mutual fund, which means you can buy or sell it intraday. Obviously, there’s tax implications. There’s often not a commission anymore for an ETF. But you can use the liquidity benefits of an ETF like VOO, Vanguard 500, to be able to access the market if your environment shifts and you need to pull some money out, and you can of course, add to it at any point during the day. Chuck Jaffe: It’s VOO, the Vanguard S&P 500 ETF. The ETF of the Week that you should all be thankful for if you’ve got it. Because yeah, since its inception, it’s up about 14% per annum on average. The ETF of the Week, from Todd Rosenbluth Todd, happy Thanksgiving! Look forward to doing this with you again soon. Todd Rosenbluth: Happy Thanksgiving! Enjoy your turkey and hopefully some dessert too. Chuck Jaffe: The ETF of the Week is well, it’s not necessarily an appetizer. It’s a primary meal sometimes in your portfolio! This program is a joint production of VettaFi and Money Life with Chuck Jaffe. And yes, I am Chuck Jaffe, and I’d love it if you would check out my hour long weekday podcast, which you can find at MoneyLifeShow.com, or on your favorite podcast app. And if you’re looking for more information on your favorite ETFs, look no further than VettaFi.com, where they’ve got all the tools you need to be a better investor. They’re on Twitter or X at @Vetta_Fi, and Todd Rosenbluth, he’s there as well. He is at @ToddRosenbluth. The ETF of the Week is normally here for you every Thursday. This week, ahead of time because of the holidays. But next week and the rest of the year, we’ll be here for you every Thursday. So why don’t you make sure you don’t miss an episode by following along on your favorite podcast app. And we’ll introduce you to more great ETFs each week. But until we do it again, happy Thanksgiving and happy investing! For more news, information, and analysis, visit the Fixed Income Channel.

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