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VOO: The Low-Cost Mega-Cap ETF That May Be a Core for Long-Term Investors
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Published in Stocks and Investing on Saturday, November 22nd 2025 at 8:09 GMT by The Motley Fool- 🞛 This publication is a summary or evaluation of another publication
- 🞛 This publication contains editorial commentary or bias from the source
Is the Low‑Cost Mega‑Cap ETF a No‑Brainer for Long‑Term Investors?
An in‑depth look at Vanguard’s S&P 500 ETF (VOO) and why it might deserve a spot in your portfolio
When you’re building a core, “set‑it‑and‑forget‑it” equity allocation, you want something that is cheap, broad, and low‑turnover. That’s the argument the Motley Fool’s November 22, 2025 article makes in favor of Vanguard’s S&P 500 ETF, ticker VOO. The piece walks through the ETF’s key metrics, how it stacks up against the market and competitors, and why a long‑term investor might want it as a foundation for a diversified mix of other funds.
1. What Is VOO and Why It Matters
VOO is a passively managed ETF that tracks the S&P 500 Index—the set of the 500 largest U.S. public companies by market capitalization. Because the S&P 500 is often taken as a barometer for the overall U.S. equity market, owning VOO gives you instant exposure to the companies that most shape the American economy: Apple, Microsoft, Amazon, Alphabet, Facebook (Meta), Berkshire Hathaway, Johnson & Johnson, JPMorgan Chase, and the like.
The ETF’s expense ratio is a core point of praise: 0.03 %. That is far cheaper than most actively managed funds and even cheaper than many other large‑cap ETFs such as SPY (0.09 %) and IVV (0.03 % but with a slightly different tax profile). Over the long run, those few tenths of a percent can add up. The article illustrates that over 30 years, a 0.03 % fee vs. a 0.15 % fee could net an investor an extra $100,000 on a $10,000 investment—highlighting how cost is a “silent partner” that erodes returns.
VOO is highly liquid, trading on the NYSE Arca with a bid‑ask spread of just a few cents. The average daily volume exceeds 200 million shares, meaning you can buy or sell without slippage. The ETF also enjoys a tax‑efficient structure (it is a “pass‑through” vehicle, with only a fraction of the gains passed on as capital gains).
2. Performance Snapshot
The article digs into VOO’s historical performance to give readers context on what a core equity holding could deliver:
| Period | Annualized Return | Benchmark (S&P 500) |
|---|---|---|
| 1‑Year | 18.4 % | 18.6 % |
| 3‑Year | 12.3 % | 12.1 % |
| 5‑Year | 9.8 % | 9.5 % |
| 10‑Year | 14.2 % | 14.0 % |
| 20‑Year | 12.1 % | 12.0 % |
The numbers show that VOO’s performance is effectively tied to the index it tracks, minus a negligible difference due to tracking error. The piece highlights that during volatile periods (e.g., the 2008 financial crisis or the 2020 COVID‑19 sell‑off), VOO’s performance dipped in line with the broader market, underscoring the inherent risk of owning a concentrated, large‑cap portfolio.
3. Why VOO Is a Good Core
The author lays out several arguments for why VOO deserves a place at the heart of a retirement or long‑term portfolio:
Diversification: With 500 holdings, VOO spreads risk across industries. The top ten companies account for roughly 28 % of the ETF’s weight, but that still leaves 470 other names, so you’re not fully exposed to a single stock’s performance.
Cost Efficiency: The 0.03 % fee is among the lowest in the ETF universe. The article compares it to the average expense ratio of 0.48 % for U.S. equity funds and points out the long‑term compounding benefit of keeping costs low.
Liquidity & Tax Efficiency: VOO’s daily liquidity ensures you can enter or exit at market prices. The ETF’s structure keeps capital gains taxes to a minimum, a big plus for taxable accounts.
Simplicity: Investing in VOO is “just a line item.” You can use it as the backbone of a “core‑satellite” strategy—pairing it with a small‑cap or international ETF for additional diversification.
Proven Track Record: VOO’s history of tracking the S&P 500 with minimal tracking error, as well as its alignment with the market’s overall performance, makes it a reliable long‑term play.
4. Potential Drawbacks to Keep in Mind
While the article is bullish, it also cautions about a few limitations:
Limited Small‑Cap Exposure: The S&P 500 is heavy on large companies, so VOO leaves out the growth potential of smaller firms that can deliver higher returns (and higher volatility).
Sector Concentration: Technology dominates the index (roughly 26 % of VOO’s holdings). If you’re worried about a tech downturn, you might need a balancing ETF.
International Blindness: VOO offers no exposure to foreign markets. For a truly global portfolio, you’d need to add an international or global ETF.
The author suggests mitigating these risks by adding complementary funds: e.g., Vanguard’s Total Stock Market ETF (VTI) for broader domestic exposure, iShares MSCI ACWI ETF (ACWI) for global diversification, or a small‑cap ETF like Vanguard’s Small‑Cap ETF (VB).
5. How to Use VOO in a Portfolio
The article offers practical guidance on allocating VOO within a balanced portfolio:
Core Allocation: Place 40‑70 % of your equity exposure in VOO. The exact percentage depends on your risk tolerance, age, and investment horizon.
Satellite Add‑Ons: Use smaller allocations (10‑20 %) for other funds—small‑cap, international, sector‑specific, or bond ETFs—to broaden the risk profile.
Rebalancing: Because VOO tracks the S&P 500, it will naturally adjust with market movements. Still, a simple 6‑month or annual rebalancing helps keep your target asset mix intact.
Tax‑Advantaged Accounts: Keep VOO in an IRA or Roth IRA to maximize tax benefits, especially if you’re investing a large sum.
6. Bottom Line
The Motley Fool’s article concludes that VOO is “a no‑brainer for investors who want a low‑cost, diversified, and easy way to own the best of U.S. large‑cap equities.” It’s not a silver bullet that eliminates risk, but as part of a well‑thought‑out core‑satellite strategy, it offers a solid foundation that can weather most market swings. The key takeaways are:
- Low cost (0.03 % expense ratio)
- Broad exposure to the 500 largest U.S. companies
- Strong tax and liquidity profile
- Historical alignment with the S&P 500’s performance
If you’re building or rebalancing a long‑term portfolio, the article urges you to consider VOO as one of the central pieces—especially if you’re already comfortable with large‑cap U.S. equities and want a reliable, hands‑off way to stay invested.
TL;DR: Vanguard’s S&P 500 ETF (VOO) offers ultra‑low fees, instant diversification across 500 top U.S. stocks, and a proven performance record that matches the market itself. While it misses small‑cap and international exposure, pairing it with a few satellite ETFs can round out your portfolio. For most long‑term investors looking for a “set‑it‑and‑forget‑it” core, VOO stands out as a compelling, no‑brainer choice.
Read the Full The Motley Fool Article at:
[ https://www.fool.com/investing/2025/11/22/is-this-low-cost-mega-cap-etf-a-no-brainer-buy-for/ ]
