Key Points
The S&P 500 has generated annualized total returns of 9% to 10%. Currently, the Vanguard S&P 500 ETF (NYSEMKT: VOO) has an expense ratio of only 0.03%, a reduction from traditional flat fees for stock trades that once ranged between $5 and $10.
Despite its growth, the yield of the S&P 500 has fallen to 1.2%. In contrast, the Vanguard Value ETF (NYSEMKT: VTV) has a higher yield of 2.2% and a lower price-to-earnings (P/E) ratio of 19.6 compared to the S&P 500 ETF’s P/E ratio of 27.2, as of June 30.
Over the past decade, the Value ETF has increased by 111.5%, with a total return of 173.5%. This implies that capital gains are a larger driver of returns compared to passive income, appealing to investors looking for diversified income sources beyond the S&P 500.
