Key Points
The S&P 500 has averaged over a 10% annual return since 1957, yet nearly 90% of hedge funds failed to outperform the index over the last decade, according to SPIVA Scorecards. This trend supports the notion of passive investing, a strategy championed by Vanguard founder John Bogle, who advised investors to opt for the entire index rather than trying to pick individual stocks.
The Vanguard S&P 500 ETF (NYSEMKT: VOO), launched in 2000, allows investors to passively track the 500 largest U.S. companies. It requires a minimum investment of just $1 and charges a low expense ratio of 0.03%, compared to the typical $2,500 minimum for mutual funds and higher fees for hedge funds. Notably, major holdings include Nvidia (7.8%), Apple (6.5%), and Microsoft (5.4%). However, the S&P 500 is currently trading at a PE ratio of 29, raising concerns about potential market declines in the near future.
