VettaFi’s Head of Research Todd Rosenbluth discussed the Vanguard S&P 500 ETF (VOO) on this week’s “ETF of the Week” podcast with Chuck Jaffe of “Money Life.”
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ETF of the Week
ETF of the Week: Vanguard S&P 500 ETF (VOO)
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you again happy Thanksgiving Chuck and to you too and i promised last week that we would not have any turkeys this week so with that in mind your ETF of the week is the Vanguard S&P 500 ETF VOO the classic the Vanguard S&P 500 ETF the VOO definitely not a turkey but i have to tell you that i'm a little bit surprised by this one after a week ago when you pick the S&P 500 equal weight income advantage the RSPA and yeah they're both based around the same index but they couldn't be more different last week you were extolling the virtues of equal weighting and getting an income protection rider so why this week are you going with the classic so Chuck listen investors have spoken VOO Vanguard 500 ETF as we're recording this is roughly a hundred billion dollars of net inflows itself a hundred billion dollars for one ETF the record free ETF inflows for one ETF was actually a Vanguard ETF and it's about doubled it 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 okay but one of the things i tell people all the time is it's easy to pick your first fund but the minute you want to pick a second fund and start to build a portfolio picking funds becomes tougher so i would never argue with a person who told me they were buying their first fund and they'd pick the VOO the Vanguard S&P 500 index great fund but once you start building a portfolio around it there are other concerns i mean again great fund but the S&P 500 is also the preferred trading vehicle for all of your big institutions and even the little guys trading the market so is this still your great make it the base of your portfolio kind of a fund it is so this is an ETF that launched in 2010 you always do a kickoff with new ETFs we did one last week newsworthy well the newsworthy aspect of this is it's a it's got roughly a hundred billion dollars that float in in this year alone which is tremendous it is the core of many people's portfolios and for good reason you get broad ex-market exposure you're tilted a little bit more towards the information technology sector because that's where apple and microsoft and invidia reside but you have exposure to other large-capped 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 that'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 how big a portion of a portfolio would you let this be if your corn explore this is core all the way and it could be a big chunk but i talked with someone on money life recently who said that because the s&p 500 has been so good investors have let it ride and they're not fully diversified so for you knowing that it's an individual decision and not a blanket type of thing how much of anybody's portfolio would you let any fund be even one as central as this one is to most investment allocations you still let me address what you were saying you know this is a ETF it's up more than 20 percent this year maybe even higher as people are listening to it i hope that the market has climbed higher as we head through the rest of november it has done better than your small cap strategy it's some better than your international strategy and so it's taken a larger slice of the overall portfolio many people tend to have a 60 40 portfolio 60 being equity 40 percent being fixed income a good chunk probably two-thirds of that should probably be us stocks but some exposure to international you should have mid cap 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 you can vanguard themselves has exposure as offers ETFs that are small cap in nature so vb is a small cap ETF vanguard has a developed international and an emerging markets ETF vea or vwo so you could build a well diversified portfolio using vanguard ETFs and of course they have sister or complementary products from i share some state streets from in vesco from others to round out the portfolio why use the voo instead of the spy the spider s&p 500 ETF trust 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 percent which is a third of the price spy's expense ratio is 0.09 percent i'm rounding here it's slightly higher than that 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 but the ETF trades quite well and quite often with reasonably tight spreads if you're a retail or you're a moderately sized advisor to 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 has been gaining scale and 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 and speaking of use cases i want to ask a question about the s&p 500 because here we are at Thanksgiving some people will look at traditional meals and they might get from acorns and acorns squash to financial programs like acorns the investment app and acorns and others have typically tied themselves and their savings apps to the s&p 500 as an investment which is great when you're saving for long-term stuff but those programs typically are for people who need the money quickly for shorter intermediate goals if you look at how much the s&p 500 moves and you want this as a core holding great but your core is not what you want to tap for cash the next time you have a need no i mean this is this should be a long-term holding for you if you have this as your core but ETFs are liquid you can certainly have this is not a mutual fund which means you can buy your solid 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 debt it's voo the vanguard s&p 500 ETF the ETF of the week that yes you should be thankful for if you've got it because since its inception it's up about 14 percent per annum on average it's the ETF of the week from Todd rosenbluth Todd happy thanksgiving see you next week happy thanksgiving enjoy your turkey and hopefully some dessert too the ETF of the week well it's not an appetizer always it could be the main course of your portfolio and it's a joint production of vetify and money life with Chuck jaffy and yes i'm Chuck jaffy and you can learn all about my hour-long weekday show by going to money life show.com or by searching for it wherever you find great podcasts now if you're searching for great information on exchange traded funds you're just looking for your next ETF look no further than vetify.com where they've got all the tools you need to be a better investor they're on exit veta underscore fi and Todd rosenbluth their head of research my guest here he's there too he's at Todd rosenbluth the ETF of the week is normally here for you on thursdays and we'll be back next thursday follow along on your favorite podcast app to make sure you don't miss an episode we'll introduce you to another great ETF next week and that one won't be a turkey either so happy thanksgiving everybody and until we do this again happy investing [BLANK_AUDIO]