Headline: Is Vanguard S&P 500 ETF (VOO) the Smartest Investment You Can Make Today?

By Leo Sun – Mar 8, 2026 at 5:45AM ESTKey PointsMost actively managed funds struggle to consistently beat the S&P 500.Therefore, it might be smarter to simply buy the whole index through an ETF.The S&P 500 has delivered an average annual return of more than 10% since its inception in 1957. Yet nearly 90% of all hedge funds underperformed the S&P 500 over the past ten years, according to SPIVA Scorecards, making it seem smarter to simply invest in the entire index. That's why John Bogle, the founder of the Vanguard Group, famously told investors: "Don't look for the needle in the haystack. Just buy the haystack." To accomplish that, Vanguard launched the first index fund, the Vanguard S&P 500 Index Fund (VFINX 1.31%), in 1976. In 2000, it launched the exchange-traded fund (ETF) version -- the Vanguard S&P 500 ETF (VOO 1.34%) -- which could be actively traded throughout the day. Image source: Getty Images. Instead of actively buying and selling stocks, those funds passively track the 500 largest U.S. companies. Since that index is rebalanced quarterly, weaker companies drop out as stronger ones are added. That's why it's difficult for actively managed funds to consistently beat the S&P 500 over the long term. So is VOO the smartest investment you can make today? ExpandNYSEMKT: VOOVanguard S&P 500 ETFToday's Change(-1.34%) $-8.38Current Price$618.43Key Data PointsDay's Range$616.00 - $621.8252wk Range$442.80 - $641.81Volume9.7M How does the Vanguard S&P 500 ETF (VOO) work? The Vanguard S&P 500 ETF requires a minimum investment of $1 and charges a low expense ratio of 0.03%. By comparison, the typical mutual fund requires an average investment of $2,500, while hedge funds can require upfront investments of over $1 million. Actively managed mutual funds charge annual expense ratios of about 1%, while hedge funds charge 1%-2% annual expenses plus "performance fees" (a share of the fund's total profits). Since the S&P 500 beats most of those funds over the long term, it seems like a huge waste of money to pay those annual expenses and performance fees. By investing in the entire S&P 500, you get instant exposure to top stocks like Nvidia (NVDA 2.94%) (7.8% of its holdings), Apple (AAPL 0.96%) (6.5%), and Microsoft (MSFT 0.43%) (5.4%). However, those top-tier Magnificent Seven stocks have also driven most of the S&P 500's growth in recent years. The index itself is also historically expensive at 29 times earnings, so investors shouldn't be too surprised if the market swoons over the next few months. That said, short-term investors shouldn't expect too much from VOO. But if you're looking for something to buy, hold, and forget for the next few decades, VOO checks all the right boxes. Read NextOct 16, 2025 •By Reuben Gregg BrewerIs Vanguard S&P 500 ETF the Smartest Investment You Can Make Today?Oct 10, 2025 •By Matt Frankel, CFPWarren Buffett Recommends Most Investors Buy This 1 Index Fund -- and It Could Turn Just $200 per Month Into $400,000 or MoreSep 22, 2025 •By Selena MaranjianIs the Vanguard S&P 500 ETF (VOO) a Buy Now?Apr 14, 2025 •By Sean WilliamsThis Is the Only Investment Warren Buffett Recommended the Last Time the Stock Market CrashedSep 21, 2024 •By Adam Spatacco3 No-Brainer ETFs to Buy as Election Uncertainty LoomsJun 30, 2024 •By Leo SunShould You Buy Berkshire Hathaway or This S&P 500 ETF?About the AuthorLeo Sun is a contributing Motley Fool stock market analyst who has worked with the company since 2013, covering technology, consumer goods, industrial, and financial sectors. He became a self-made millionaire by age 40 through long-term investing, crediting lessons from Warren Buffett and Peter Lynch. Leo is a regular guest on CNBC Asia providing stock analysis on Chinese technology companies, including Tencent, Baidu, and Alibaba. He previously wrote for InvestorGuide and holds a bachelor’s degree in English from the University of Texas at Austin.TMFSunLionX@TMFSunLionStocks MentionedVanguard S&P 500 ETFNYSEMKT: VOO$618.43(-1.34%)-$8.38AppleNASDAQ: AAPL$257.80(-0.96%)-$2.49MicrosoftNASDAQ: MSFT$408.93(-0.43%)-$1.75NvidiaNASDAQ: NVDA$177.82(-3.01%)-$5.52Vanguard Index Funds - Vanguard S&P 500 ETFNASDAQMUTFUND: VFINX$623.43(-1.31%)-$8.30*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.