Key insights
- The article suggests that the recent S&P 500 sell-off may present a buying opportunity for the Vanguard S&P 500 ETF (VOO). It highlights the index's historical performance and sector weightings, emphasizing the dominance of Information Technology. While not explicitly bullish, the piece implies a positive outlook based on historical trends and the quality of companies within the index, suggesting a mild positive influence on US equities.
The S&P 500 (^GSPC 0.58%) is America's most widely followed stock-market index because of its diversified composition and strict entry criteria. It hosts 500 companies from 11 different sectors of the economy, and those companies must maintain a minimum market capitalization of $22.7 billion. In addition, they must be profitable.
This ensures the S&P 500 only holds the highest-quality names, which is why it has averaged an impressive annual return of 10.6% since its inception in 1957. However, it's off to a volatile start in 2026 as it's lost around 5% of its peak value so far, as geopolitical tensions have created a very tricky environment for investors.
The Vanguard S&P 500 ETF (VOO 0.57%) is an exchange-traded fund (ETF) that tracks the performance of the S&P 500 by holding the same stocks and maintaining similar weightings. Could the recent sell-off in the index be a good buying opportunity, or should investors sit on the sidelines? History offers a very clear answer.
The S&P 500 is weighted by market capitalization, so the largest companies in the index have a greater influence over its performance than the smallest. Therefore, even though the index hosts companies from 11 different sectors, some have a significantly higher representation than others.
Below are the five largest sectors in S&P 500, along with their weightings and most valuable companies.
S&P 500 Sector
Weighting
Most Valuable Companies
- Information technology
32.4%
Nvidia, Apple, Microsoft
- Financials
12.5%
Berkshire Hathaway, JPMorgan Chase, Visa
- Communication services
10.5%
Alphabet, Meta Platforms, Netflix
- Consumer discretionary
10%
Amazon, Tesla, Home Depot
- Healthcare
9.8%
Eli Lilly, Johnson & Johnson, AbbVie
The other six S&P 500 sectors are industrials, consumer staples, energy, utilities, materials, and real estate.
Information technology is home to more trillion-dollar enterprises than any other sector. Nvidia, Apple, and Microsoft are three of the world's largest companies, sharing a combined market capitalization of $10.9 trillion. Then there's Broadcom, with a market cap of $1.5 trillion, and Taiwan Semiconductor Manufacturing, which is worth $1.7 trillion.
The S&P 500 has climbed by 128% over the last decade, but without the information technology sector -- which has quadrupled in value over the same period -- that return shrinks to just 85%.
Simply put, the S&P 500 provides investors with ample exposure to some of the world's fastest-growing companies, which operate at the cutting edge of industries like artificial intelligence (AI), while maintaining a healthy dose of diversification through sectors like financials, consumer discretionary, healthcare, and more.
The Vanguard S&P 500 ETF is one of the most cost-effective ways to buy the S&P 500. It has an expense ratio of 0.03%, so an investment of $100,000 would incur an annual fee of just $30.
Volatility is a normal part of the investing journey. According to Capital Group, the S&P 500 suffers a decline of 5% once per year, on average, and a correction of 10% every 2.5 years. Bear markets, which are defined by peak-to-trough declines of 20% or more, are less common but still come around every six years or so.
As I mentioned earlier, the S&P 500 has delivered a compound annual return of 10.6% since 1957, and that's after accounting for every sell-off, correction, and bear market along the way. Therefore, market downturns have typically been incredible buying opportunities, and this time is unlikely to be different.
Geopolitical tensions, like the conflict in Iran, could trigger further downside in the S&P 500 in the short term as investors weigh the economic consequences of supply-chain disruptions and soaring oil prices. But timing the market is impossible, so waiting on the sidelines for a better opportunity could actually result in missed returns.
Therefore, this could be a great time to buy the Vanguard S&P 500 ETF, as long as investors plan to hold for a long-term period of at least three to five years. Anybody who's uncomfortable with the elevated levels of volatility right now might benefit from scaling into the ETF with small, consistent monthly purchases, rather than investing a lump sum of money.