How ‘voo and chill’ makes investing easier
When people first learn that I am a personal finance reporter, they often ask me where they should invest. Until recently, let me even be able to answer that question.
My canned response often goes something like: “I’m not an investment expert. I cover the high street – not Wall Street.” I say this not as a legal statement (please, do not take my reporting as investment advice) but also because I just think about stocks. That’s part of why it took me 32 years to open my first merchant account.
But when I crossed that financial debate this summer, I admit, I felt a sense of accomplishment, especially since my first purchase followed in December. Finally, I’m starting to feel like an adult.
The impetus for setting up an investment account was that I kept watching the interest rate on my savings account build. Meanwhile, the stock market was rallying. I wanted action, and I had enough in emergency cash (and I contribute to a 401(k) and a roth IRA). So I decided that the surplus would be better spent in a fidelity brokerage account.
However, a new pride in my financial self-sufficiency began immediately when it came time to decide where, of course, to invest the $5,000 I had just transferred to the account. Given that I try to think as little about stocks as possible, I chose to be simple: 100% in voo, a low-yield exchange-traded fund, or ETF, offered by Vanguard that tracks the S & P 500 index.
Or, in Reddit velocular, I decided to “voo no chill.”
Voo and chill – in this economy?
Historically, investments such as voo or other ETFs that track the S&P 500 have performed “by default” for average investors, according to Patrick Huey, principal advisor and owner of Victory Independent Planning.
“Voo and Chill — allowing time to do the work — is simple and effective,” Huey, who is a certified financial planner, said in an email.
If you’ve got an emergency savings fund and are on track with retirement contributions, Huey says the Voo-and-Chill strategy is a “perfectly sensible, perfectly sensible, hand-off” way to sell long-term investments. “I’m all for that.”
“IS&P is one of the greatest mutual funds of all time,” said Todd Soohn, director of ETF Strategist “It’s a good place to start for a lot of people.”
Voo in particular has very low fees, with an average expense ratio of 0.03%, making the cost “almost negligible,” Shohn said. In terms of returns, voo is about the same as the S & P 500. Date 2010. Not bad for manual investing.
For everyday investors, beating that return is nearly impossible, Shohn said.
By 2024, for example, less than 5% of mutual funds will outperform the S&P 500, based on a risk-adjusted return analysis.
“Unless you’re sitting at a desk full time doing this. It’s a big challenge to trade like that,” Shohn said. “For most people, it’s very difficult.”
‘Can you really tell the AI Bubble is growing?
The Core Perk of Voo and Chill is that you don’t have to spend time trying to beat the market – when you can be the market. But what if there are problems emerging in the markets themselves?
Recently, many investors – myself included – began to worry about the composition of the S & P 500 Index, and how that can affect a friendly investment strategy.
“The real risk profile of voo has changed over the last few years,” says Huey. Your ‘different’ Index is more exposed to Apple, Microsoft and Nvidia than it appears. “
While the S & P 500 has an average of 500 large publicly traded companies, a few of the technology companies – Seven Basic Account for 36% of the total weight of the index, according to the portfolios that hold the funds of easily managed indexes.
“So $36 of every $100 you invest in the S&P goes to technology,” he said, especially firms that go big on artificial intelligence.
Several analysts are warning of ai bubble, and if the bubble were to burst, it would have a big impact on voo and the same ETFS, even if it no longer works with clear investment technology.
But that’s no reason to write a completely Voo-and-Chill strategy. In fact, it highlights the “chill” part of the plan, Huey said.
“My question is always: Can you really catch it?” He says, noting that voo has fallen nearly 30% during a recent sell-off. “Staying disciplined is the real key, don’t just pick a set product—and forget about IT.”
Include a small technical presentation
To make potentially more attractive sales, Huey and Sohn both suggest balancing voo with ETFs that provide exposure to more major US firms.
Earlier this month, I put a portion of my paycheck into the Vanguard international storage etf (vxus) for a reason. Vxus is one of the most expensive ETFs that tracks a global stock index, and sohn says it can easily add voo and chill.
Similarly, Huey says International ETFS are good options, as they are CAP-CAP COUCK ETFS, which can provide exposure to companies that are often overlooked and help investors diversify their portfolios.
While Boring, Sohn notes that Treasury bills can help round the voo, too. T-Bills can be US debt securities, and he says the TBIL ETF — which provides exposure to three-month Treasuries — acts “as a currency proxy.”
“Ultimately, successful investing isn’t about being cold,” Huey said, “it’s about building a plan (and portfolio) You can actually stick with where the world is cut right there.”
More from money:
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Why Investors Are Cashing in ETFS at a Record Pace
This retirement strategy used can increase your adjusted income payout by 23%
