1 No-Brainer S&P 500 Vanguard ETF to Buy Right Now for Less Than $1,000
Key Points
The S&P 500 is up 8% on the year following a 9% correction in March.
The AI trade has resumed and the index is being pulled higher on the strength of tech stocks.
Strong earnings growth and relatively modest valuations make the Vanguard S&P 500 ETF a no-brainer buy right now.
Thanks to a big resurgence in tech stocks over the past month and a half, the S&P 500 (SNPINDEX: ^GSPC) has enjoyed a similar turnaround.
On March 30, the index was down more than 7% on the year. As of May 11, it's up more than 8% year to date. The initial scare from the Iran war appears to have subsided, and underlying corporate fundamentals have meaningfully improved. While the recent surge in equity prices may be due for a breather, the backdrop for further record highs for the Vanguard S&P 500 ETF (NYSEMKT: VOO) remains quite positive.
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Key takeaways
- S&P 500 earnings are on pace to grow by 27% year over year in Q1 2026. Revenue is forecast to grow by 11%.
- About 84% of S&P 500 companies have beaten earnings estimates, which would be the highest beat rate in almost five years.
- The forward-looking price/earnings (P/E) ratio for VOO is 19.6, the lowest it has been since November 2023.
- The current combination of fundamentals and valuation makes the Vanguard S&P 500 ETF a compelling buy.
Earnings and valuations are very positive
Even though the S&P 500 is currently on pace for its fourth straight year of double-digit returns, the current backdrop is still supportive of higher prices.
Year-over-year earnings growth rates for the S&P 500 were expected to be positive coming into the Q1 season, but they've only gotten better as the results have come in. As it stands right now, the index is on pace to grow earnings by 27% compared to the same quarter a year ago. That would be the sixth consecutive quarter of double-digit year-over-year growth.
Due to strong corporate earnings, valuations haven't really gotten stretched. The forward price/earnings (P/E) ratio for the S&P 500 has actually been coming down throughout 2026. Currently, it's at 19.6, which is the lowest reading since 2021. Instead of valuation expansion, the current rally is being driven by earnings growth. This is a key characteristic of a sustainable rally.
VOO: Performance & key metrics
| Metric | VOO |
|---|---|
| Price (as of May 11, 2026) | ~$680 |
| Expense ratio | 0.03% |
| Assets under management | $947 billion |
| 1-year return | 32.1% |
| 3-year annualized return | 23% |
| 5-year annualized return | 13.4% |
| Dividend yield | 1.1% |
Source: Vanguard.
The Vanguard S&P 500 ETF remains the best way to invest in the index.
Its 0.03% expense ratio means that investors pay next to nothing to own it. Its roughly $950 billion asset base ensures that liquidity is high and trading spreads are negligible. The 1.1% dividend yield won't necessarily get income investors excited, but the heavy tech allocation and AI tailwind should mean the share price has the catalysts to keep growing.
For almost any investor with a time horizon of five years or longer, the Vanguard S&P 500 ETF is a no-brainer addition to a portfolio.
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David Dierking has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
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