The Vanguard S&P 500 ETF Is a Great Investment. But Is It Safe?

If you're looking for a elemental mode to put successful the banal market, the Vanguard S&P 500 ETF (NYSEMKT: VOO) is hard to ignore. You'll often perceive that it's 1 of the easiest ways to physique a divers portfolio, since it simply tracks the S&P 500 index.

When you bargain shares of the fund, you're investing successful astir 500 of the largest publically traded companies successful the United States. That includes household names crossed assorted industries, giving you instant diversification without having to probe and bargain dozens of idiosyncratic stocks yourself.

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But is the Vanguard S&P 500 ETF a "safe" investment? Not exactly.

Like immoderate concern tied to the banal market, the Vanguard S&P 500 ETF comes with risks that you should recognize earlier making it a halfway portion of your portfolio.

Get acceptable for marketplace swings

One of the biggest misconceptions astir the Vanguard S&P 500 ETF is that owning hundreds of companies makes it immune to marketplace downturns. That's conscionable not true.

Because the money tracks the S&P 500, its show rises and falls with the broader U.S. banal market. During carnivore markets oregon periods of economical uncertainty, it's not antithetic for the money to suffer important value. If that's the benignant of happening that mightiness messiness with your caput arsenic an capitalist and origin you to merchantability successful a panic, you whitethorn privation to reconsider.

It's not arsenic divers arsenic you mightiness deliberation

Because the S&P 500 comprises specified a wide scope of companies, you'd deliberation you'd beryllium each acceptable connected the diversification beforehand with the Vanguard S&P 500 ETF. But you should cognize that a ample percent of the fund's worth is concentrated successful a comparatively tiny radical of mega-cap tech companies.

This means that if the tech assemblage experiences a prolonged downturn, it could person an outsize effect connected the fund's worth -- much truthful than what a downturn crossed different marketplace conception mightiness cause.

It's champion suited for semipermanent investors

If you're looking to physique wealthiness implicit time, past the Vanguard S&P 500 ETF could beryllium a bully spot to put your status savings. If you person a shorter concern model oregon are highly risk-averse, past you whitethorn privation to take a large-cap worth ETF that whitethorn beryllium little apt to acquisition aggravated swings.

Even if you're consenting to instrumentality connected the hazard that comes with investing successful the S&P 500, the Vanguard S&P 500 ETF shouldn't beryllium the lone plus successful your portfolio. Rather, you should purpose for a well-rounded premix that includes different assets and plus classes, similar bonds oregon adjacent cash.