Long-Term Investing With VOO: S&P 500 Strategy
VOO gives you 500 of America's largest companies for 0.03% a year. Here's how to build a long-term buy-and-hold strategy around it, and the diversification it leaves out.
Don't have time? Here's what you need to know:
- 1VOO holds ~500 large U.S. companies (the S&P 500) for a 0.03% expense ratio — about $30 a year per $100k.
- 2The S&P 500 has historically returned roughly 10% a year before inflation over the long run, with big swings along the way.
- 3The winning VOO strategy is dollar-cost averaging plus dividend reinvestment, held through every downturn.
- 4VOO is a core, not a complete portfolio — it lacks international stocks, small-caps, and bonds; pair it with VXUS and BND.
What You Actually Own With VOO
VOO is Vanguard's S&P 500 ETF: a single fund that holds roughly 500 of the largest U.S. companies, weighted by market value, for an expense ratio of just 0.03%. Buying one share makes you a part-owner of the broad American corporate economy — technology, healthcare, financials, energy, consumer brands, and the rest — in one low-cost, automatically maintained package. You never have to pick stocks, and the index quietly drops fading companies and adds rising ones for you.
That 0.03% fee is about as low as investing gets. On a $100,000 balance it works out to roughly $30 a year, leaving essentially all of your return to compound for you. For a long-term, buy-and-hold investor, that combination — instant diversification across the U.S. large-cap market at a rock-bottom cost — is exactly what makes VOO such a popular core holding.
Why VOO Suits Buy-and-Hold
The S&P 500 has historically returned roughly 10% a year on average over the long run (before inflation), with dividends reinvested. That average hides enormous year-to-year swings — losing years, soaring years, and the occasional brutal crash — but over multi-decade horizons the index has reliably trended upward as the underlying companies grew their earnings. VOO is designed to capture that long-run trend at minimal cost, which is precisely the job a buy-and-hold core needs done.
The strategy that fits VOO is unglamorous and effective: buy it on a regular schedule, reinvest the dividends, and hold through every downturn. Dollar-cost averaging into VOO automatically buys more shares when prices are low and fewer when they're high, and reinvested dividends quietly add to your share count year after year. The hard part isn't the mechanics — it's resisting the urge to sell when the index drops, which it inevitably will from time to time.
| VOO at a glance | |
|---|---|
| Index tracked | S&P 500 (~500 largest U.S. companies) |
| Expense ratio | 0.03% |
| Annual cost per $100k | ~$30 |
| Long-run S&P 500 average | ~10% nominal/year (with dividends, historical) |
| Best use | Low-cost buy-and-hold core holding |
Tip: Turn on automatic dividend reinvestment for VOO. It compounds your share count without any action on your part and keeps every payout working.
Letting Decades Do the Work
The case for holding VOO for the long haul rests on compounding over long stretches of time. Even modest, regular contributions can grow into a substantial balance when given decades to compound at the market's historical rate — though future returns are never guaranteed and could be lower. The investor's main contributions are consistency and patience: keep buying, keep holding, and let the long-run earnings growth of America's largest companies accumulate.
This is also why starting and staying invested matters more than perfect timing. Trying to wait for the ideal entry point usually means holding cash that earns little while the market drifts up over the years. A long-term VOO strategy sidesteps the timing problem entirely by investing on a fixed schedule and simply staying in the market through whatever it does. You can model different contribution schedules with the ETF return calculator.
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Where VOO Stops Being Enough
VOO is an excellent core, but it is not a complete portfolio. It holds only large U.S. companies, so it leaves out international stocks, small- and mid-cap companies, and bonds entirely. In stretches when foreign markets or smaller companies outperform — and there have been long ones — a VOO-only portfolio lags a more diversified one. It's also 100% equities, which means it can fall 30% or more in a serious bear market with no bond cushion to soften the blow.
Many long-term investors keep VOO as the foundation and build outward: adding international exposure with VXUS, and bonds with BND as they near their goals or want a smoother ride. A broader U.S. total-market fund like VTI is a close cousin that also includes small- and mid-caps at the same 0.03% cost. VOO is a superb starting point for a long-term core — just be clear-eyed that a complete portfolio usually adds a few more pieces around it.
Important: VOO is 100% U.S. large-cap stocks with no bonds or international exposure. On its own it can fall sharply in a downturn, so most investors pair it with other assets for diversification.
Frequently Asked Questions
Is VOO a good long-term investment?
VOO is widely regarded as one of the best low-cost cores for long-term, buy-and-hold investing. It tracks the S&P 500 — about 500 of the largest U.S. companies — for a 0.03% expense ratio, and the index has historically returned roughly 10% a year before inflation over the long run. Past performance doesn't guarantee future results, but the low cost and broad exposure make it a strong foundation.
How should I invest in VOO for the long term?
Buy it on a regular schedule (dollar-cost averaging), turn on automatic dividend reinvestment, and hold through downturns. The mechanics are simple; the discipline is the hard part. Automating contributions removes the temptation to time the market and lets the S&P 500's long-run earnings growth compound on your behalf over the decades.
Is VOO enough on its own, or do I need other funds?
VOO is an excellent core but not a complete portfolio. It holds only large U.S. stocks — no international, small-caps, or bonds — and is 100% equities, so it can drop sharply in a bear market. Many investors keep VOO as the foundation and add international exposure (VXUS) and bonds (BND) for diversification and a smoother ride as they near their goals.
What's the difference between VOO and VTI for long-term investing?
Both are Vanguard funds at a 0.03% expense ratio, but VOO tracks the S&P 500 (large U.S. companies only), while VTI tracks the total U.S. market and also includes small- and mid-cap stocks. VTI is slightly more diversified within the U.S.; VOO is more concentrated in large-caps. Either works well as a long-term core, and their long-run returns have been very similar.
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Alex Harrington
CFA Level II Candidate, Finance & Economics
Alex Harrington is an independent ETF researcher and personal finance writer with over 8 years of experience analyzing exchange-traded funds. A CFA Level II candidate with a background in economics, Alex has reviewed 800+ ETFs and helped thousands of beginners build their first investment portfolios through clear, jargon-free education.
This content is for educational purposes only and does not constitute financial advice. Past performance does not guarantee future results. Consult a licensed financial advisor before making investment decisions.