Key insights
- The article suggests a slightly bullish outlook for May, barring renewed Middle East tensions, citing solid corporate earnings and adequate economic growth. It recommends Vanguard's S&P 500 ETF (VOO) as a preferred investment vehicle due to its balance of low expense ratio and high trading volume, potentially leading to lower total costs for investors.
April had investors feeling good again. With the Iran war tensions slowly subsiding, stocks quickly began recovering what they had lost in March. After a 9% decline earlier this year, the S&P 500 (^GSPC +0.09%) was back at all-time highs in mid-April and has been pushing higher ever since.
There are four primary exchange-traded funds (ETFs) you can use for investing in the S&P 500:
Each ETF is huge in terms of assets under management (AUM), very liquid, and ultra-cheap. Choosing between them can be like splitting hairs, but there's one I prefer slightly above the others.
If you look at the best S&P 500 ETFs from a high-level view, there's really no difference. Their performance is virtually the same. Their yield is virtually the same. They're all investing in the same index, so the only real differentiator is cost.
On that front, the State Street SPDR S&P 500 ETF gets dropped from consideration. In a segment where every basis point counts, charging nearly 6.5 basis points more than its competitors doesn't make sense for a retail investor.
If you want to look purely at expense ratio, the State Street SPDR Portfolio S&P 500 ETF wins with its 0.02% expense ratio. But that's not the only cost to consider. Trading spreads, which are a function of liquidity and tradability, can add to a fund's total cost.
This is where Vanguard gets the edge. Its modestly higher trading volume and AUM base compared to both the iShares Core S&P 500 ETF and the State Street SPDR Portfolio S&P 500 ETF likely lower trading fees. That can give the Vanguard S&P 500 ETF the slightest of edges on a total cost basis.
Unless we get a re-escalation in the Middle East conflict, May looks like it's setting up to be a good month. Corporate earnings are growing solidly. Economic growth figures aren't great, but they're good enough for the time being. That creates a supportive environment for higher stock prices.
If you're looking to invest in the S&P 500 in May or add to your existing positions, the Vanguard S&P 500 ETF is the best choice.