VOO is an exchange-traded fund that tracks the S&P 500

VOO is an ETF — a fund you can buy and sell like a stock — that holds shares in the 500 largest U.S. companies. It is managed by Vanguard and tracks the S&P 500 index, which means it aims to move up and down in line with those 500 companies as a group. When you own VOO, you own a small piece of all 500 companies at once.

The fund trades on the stock exchange under the ticker symbol VOO. You can buy it through any brokerage account — the same way you would buy individual stocks — and the price changes throughout the trading day as the market moves. Unlike a mutual fund, which you typically buy and sell once per day at a set price, an ETF price updates every few seconds while the market is open.

Key Takeaways

  • VOO holds shares in 500 large U.S. companies and tracks the S&P 500 index, so its value rises and falls with those companies as a group.
  • You can buy and sell VOO through any brokerage account during market hours, just like buying a stock.
  • VOO charges a very low annual fee — currently around 0.03 percent — which means most of your money stays invested rather than going to the fund manager.
  • The fund pays dividends to shareholders, usually quarterly, from the earnings of the companies it holds.
  • VOO is one of the largest and most widely held ETFs in the United States, which means it is easy to buy and sell without moving the price.

How VOO differs from owning individual stocks

If you bought shares in Apple, Microsoft, and Tesla individually, you would own only those three companies. With VOO, you own a piece of all 500 companies in the S&P 500 at once. This spread across many companies is called diversification, and it reduces the risk that one company's bad news will hurt your money significantly.

When you own individual stocks, you have to research each company, decide how much of your money to put in each one, and monitor them separately. With VOO, Vanguard does that work for you — the fund automatically holds the same companies that make up the S&P 500 index, and it rebalances when the index changes. You pay a small fee for this, but it is far lower than what you would pay a financial advisor to manage a portfolio for you.

The annual fee and how it affects your returns

VOO charges an annual expense ratio of approximately 0.03 percent. This means that on every $10,000 you invest, you pay about $3 per year in fees. The money comes out automatically — you do not write a check — and it is deducted from the fund's value before dividends are paid to shareholders.

This fee is extremely low compared to most mutual funds, which often charge 0.5 to 1 percent or more per year. Over decades, that small difference adds up. If two funds earn the same return before fees, the one with lower fees will leave you with significantly more money at the end. This is why many investors choose VOO and similar low-cost index ETFs as the foundation of their portfolio.

Dividends and how they work in VOO

The 500 companies in VOO pay dividends — cash payments to shareholders — and VOO passes those dividends on to you. Most of the time, VOO distributes dividends quarterly, meaning four times per year. The amount varies depending on how much profit the companies earned that quarter.

When a dividend is paid, you have two choices: you can take the cash, or you can reinvest it by buying more shares of VOO. Many investors set up automatic reinvestment so the dividends buy more shares without them having to do anything. Over time, reinvesting dividends can significantly increase the number of shares you own, which is one reason people hold VOO for the long term.

Who should consider VOO and who might not

VOO works well for investors who want broad exposure to large U.S. companies without picking individual stocks or paying high fees. It is especially useful as a core holding in a retirement account like a 401(k) or IRA, where you plan to hold it for years or decades. Because it tracks a major index, it is also a good choice for people who want to match the overall market's performance rather than try to beat it.

VOO may not be the right choice if you want exposure to smaller companies, international markets, or specific industries. It also does not work if you are looking for income — the dividend yield is typically around 1 to 2 percent per year, which is modest. And if you believe you can pick individual stocks that will outperform the market, you might prefer to build your own portfolio instead of holding an index fund.

How to buy VOO and what to expect

To buy VOO, you need a brokerage account — an account with a company that lets you trade stocks and ETFs. Many brokerages, including Fidelity, Charles Schwab, E-Trade, and others, offer accounts with no minimum balance and no commission to buy or sell VOO. You can open an account online in minutes, link a bank account, and place your first order.

Once you own VOO, you can check its price any time the market is open (9:30 a.m. to 4 p.m. Eastern time on weekdays). You can sell it whenever you want, though if you sell within a short time of buying, you may lose money if the market has moved down. Most people who buy VOO hold it for years, treating it as a long-term investment rather than something to trade frequently.

VOO compared to other S&P 500 ETFs

VOO is not the only ETF that tracks the S&P 500. Other major options include SPY (managed by State Street) and IVV (managed by BlackRock). All three hold the same 500 companies and track the same index, so their performance is nearly identical. The main differences are in fees — VOO and IVV both charge around 0.03 percent annually, while SPY charges about 0.09 percent — and in trading volume, which affects how easily you can buy and sell.

VOO is the largest of the three by assets under management, which means it is extremely easy to buy and sell without affecting the price. For most investors, the choice between these three comes down to which brokerage you use and whether you already have an account there. The differences in cost and performance are so small that picking any of them puts you in a solid position.

Frequently Asked Questions

Can I lose money by holding VOO?

Yes. VOO's value rises and falls with the stock market. If the market drops 20 percent, VOO will drop roughly 20 percent too. However, historically the stock market has recovered from downturns and reached new highs over time. If you hold VOO for decades, you are more likely to come out ahead than if you hold it for a few years.

Do I have to reinvest the dividends?

No. You can choose to receive dividends as cash instead. Most brokerages let you set this preference when you buy the fund. Many investors reinvest automatically because it compounds over time, but taking the cash is also a valid choice if you need the income.

Is VOO the same as the S&P 500?

No, but it tracks it very closely. The S&P 500 is an index — a list of 500 companies and their prices. VOO is a fund that owns shares in those companies. When you buy VOO, you are buying a fund that mimics the index's performance, not the index itself.

What happens if a company leaves the S&P 500?

When a company is removed from the index, VOO automatically sells that company's shares and buys shares in the company that replaces it. This happens a few times per year, and Vanguard handles it without you having to do anything. The fund's performance may dip slightly on the day of the change, but this is normal and expected.

Can I hold VOO in a retirement account?

Yes. VOO can be held in a 401(k), IRA, Roth IRA, or any other retirement account your brokerage offers. Many employers offer VOO as an option in their 401(k) plans. Holding it in a retirement account means you do not pay taxes on dividends or gains until you withdraw the money, which is one reason it is popular for long-term investing.