Should you buy this soaring Warren Buffett ETF?

The Vanguard S&P 500 ETF (VOO), which tracks the S&P 500 Index, currently ranks among the year’s best-performing exchange-traded funds (ETFs).

VOO offers a compelling case for investors, particularly given its backing by investment magnet Warren Buffett through Berkshire Hathaway (NYSE: BRK.A). Buffett has previously recommended index funds as a safe option for retirement savings.

In addition to strong returns in 2024, VOO provides several key benefits of ETFs, including low costs, diversification, and transparency.

As of press time, VOO was valued at $549.03, reflecting year-to-date returns of 26.60%. The fund has surged nearly 40% over the past year.

Historical returns suggest that VOO is a reliable performer for investors. Over the past decade, VOO has delivered an average annual return of 12.96% or a cumulative 238.3%.

Why invest in VOO? 

At a glance, VOO is an attractive investment, especially considering its relatively low price. The fund tracks the largest companies in the stock market, which have been central to the S&P 500’s impressive year. 

The index recently hit the 6,000 milestone for the first time, buoyed by optimism around Donald Trump’s re-election.

VOO’s top holdings include Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), and Nvidia (NASDAQ: NVDA), companies that have helped fuel VOO’s growth. As such, VOO is ideal for investors seeking exposure to the booming tech sector, particularly companies leading the way in artificial intelligence.

The Vanguard S&P 500 ETF also offers the benefit of regular rebalancing. Market-dominant players like Nvidia represent a larger portion of the fund based on their size, while underperforming stocks are replaced with rising stars. For example, after an impressive 2024 performance, Palantir (NYSE: PLTR) was added to the index, while Dell (NYSE: DELL) made a return.

Institutional investors are also expressing confidence in VOO. Legendary investor Julian Robertson, through his Tiger Management, purchased an additional 17,800 VOO shares in the third quarter, bringing his total to 43,150 shares.

Meanwhile, Wall Street analysts are bullish on the S&P 500 index’s prospects in the coming years, which could align well for VOO. 

For instance, strategist Ed Yardeni projects the index could reach 10,000 by the decade’s end, driven partly by optimism around Trump’s re-election. Analysts also believe his proposed corporate tax cuts could fuel a stock market rally.

“We expect to see a broadening of the companies and industries for which analysts raise their sights in 2025,” he said.

Word of caution on VOO

While the outlook for VOO is positive, caution is warranted. Some analysts have warned that the recent surge in the index could signal a potential market correction, particularly after the S&P 500 recently surpassed the 6,000 mark.

Despite the possibility of market declines, ETFs like VOO have proven rewarding in the long run, based on their strong historical performance. With VOO priced just above $500, its solid fundamentals and past returns make it a compelling investment opportunity at this time.

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