1 Vanguard Index Fund to Buy Before It Soars 103%, According to a Wall Street Analyst
Key Points
Tom Lee of Fundstrat Global Advisors thinks the S&P 500 can reach 15,000 by 2030, a forecast that implies 103% upside from its current level of 7,386.
Lee sees two catalysts driving the S&P 500 higher: Millennials are set to inherit a tremendous amount of money, and artificial intelligence (AI) will reshape the U.S. economy.
The Vanguard S&P 500 ETF provides exposure to many of the most influential stocks in the world, and it returned 758% over the last two decades.
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The S&P 500 (SNPINDEX: ^GSPC) is considered the single best gauge for the overall U.S. stock market. Tom Lee at Fundstrat Global Advisors thinks the benchmark index will reach 15,000 by 2030. That implies 103% upside from its current level of 7,386.
Investors can position their portfolios to benefit by purchasing shares of an S&P 500 index fund, such as the Vanguard S&P 500 ETF (NYSEMKT: VOO). Here are the important details.
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The Vanguard S&P 500 ETF provides exposure to many of the most influential stocks
The Vanguard S&P 500 ETF tracks the performance of the S&P 500, an index comprising the 500 largest U.S. companies, which represent about 80% of domestic equities and 50% of global equities by market value. The fund includes stocks from every market sector, though it is most heavily weighted toward technology stocks.
In short, the Vanguard S&P 500 ETF offers exposure to many of the most influential companies in the world, with a bias toward the technology sector.
Here are the top 10 positions listed by weight:
- Nvidia: 7.5%
- Apple: 6.6%
- Alphabet: 5.3%
- Microsoft: 4.9%
- Amazon: 3.6%
- Broadcom: 2.6%
- Meta Platforms: 2.2%
- Tesla: 1.8%
- Berkshire Hathaway: 1.5%
- JPMorgan Chase: 1.3%
Excluding dividends, the S&P 500 advanced 485% (9.1% annually) over the last 20 years. Including dividends, the index achieved a total return of 758% (11.2% annually) over the same period. Importantly, the benchmark index delivered those strong results despite the U.S. economy suffering two recessions in the last 20 years.
Looking ahead, Tom Lee's forecast saying the S&P 500 will hit 15,000 by 2030 implies total returns exceeding 15% annually.
Tom Lee says millennials and AI will drive the S&P 500 to 15,000
Tom Lee is the head of research at Fundstrat Global Advisors. As mentioned, he believes the S&P 500 will hit 15,000 by 2030, and he justifies that forecast by highlighting secular tailwinds surrounding the millennial generation and artificial intelligence (AI).
- Millennials are the largest living adult generation, and they are reshaping the economy as they enter their peak earnings years. Also, millennials alone are projected to inherit $68 trillion over the next 20 years as part of the largest generational wealth transfer in history, further increasing their economic impact.
- The adoption of artificial intelligence as a means of boosting productivity and efficiency will be a major catalyst for the technology sector, which represents 35% of the S&P 500. Indeed, many analysts believe AI will be the most economically impactful innovation since the advent of the internet or even the invention of the microprocessor.
Lee believes the artificial intelligence boom will lead to parabolic growth in the technology sector due to a global labor shortage, saying, "Between 1948 and 1967, there was a global labor shortage, and technology stocks went parabolic. And between 1991 and 1999, there was a global labor shortage, and technology stocks went parabolic. So, this is what's happening today."
Here is the bottom line: Whether Lee is correct or not in predicting the S&P 500 will reach 15,000 by 2030, the index has consistently created wealth over long holding periods. In fact, the S&P 500 has never failed to deliver a positive return over any 15-year period in history, meaning investors who bought an S&P 500 index fund at any point since 1957 made money, so long as they held the fund for at least 15 years.
That makes an S&P 500 index fund a wise choice for long-term investors. And the Vanguard S&P 500 ETF stands out because it has a cheap expense ratio of 0.03%, which means shareholders will pay just $3 per year on every $10,000 invested in the fund. For context, the average expense ratio on similar funds from other asset managers is 0.75%, according to Vanguard.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Trevor Jennewine has positions in Amazon, Nvidia, Tesla, and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Broadcom, JPMorgan Chase, Meta Platforms, Microsoft, Nvidia, Tesla, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
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