1 Costly Mistake Too Many Investors Make With the Vanguard S&P 500 ETF (VOO)
Written by David Dierking for The Motley Fool -> The Vanguard S&P 500 ETF (VOO) is the cornerstone of many retail investor portfolios. Many investors think they're getting a broad cross-section of the U.S. economy. In reality, they're getting a concentrated, tech-heavy portfol
The Vanguard S&P 500 ETF (VOO) is the cornerstone of many retail investor portfolios.
Many investors think they're getting a broad cross-section of the U.S. economy.
In reality, they're getting a concentrated, tech-heavy portfolio that's heavily influenced by just a few stocks.
The S&P 500 (SNPINDEX: ^GSPC) , despite its diversified simplicity, has become one of the best investments of the past decade. Over the past 10 years, the Vanguard S&P 500 ETF (NYSEMKT: VOO) , which tracks the well-known index, has generated a total return of 327%. That's not quite as good as many tech and growth exchange-traded funds (ETFs) over the same period. But a 15.5% average annual return from a diversified basket of large-cap stocks is really good by almost any measure.
Well, diversification is what many investors think they're getting with the S&P 500, at least.
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The truth is that the index is as overweight tech today as it's ever been. With a 35% allocation, the S&P 500 looks less like a fully diversified portfolio and more like a tech fund with other sectors sprinkled around the edges.
The concentration problem isn't just limited to the sector level. While the percentage of assets committed to tech is the highest it's been since the launch of the Vanguard S&P 500 ETF in 2011, it's not the only area exerting significant influence.
