Could Buying VOO Today Set You Up for Life?

When it comes to finding a hassle-free investment option, it's hard to top the Vanguard S&P 500 ETF (NYSEMKT: VOO). Offered by one of the most highly regarded companies in the asset management industry, this exchange-traded fund (ETF) can be exactly what investors need to bolster their portfolios for the long term.

But if you buy it today, will it set you up for life?

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Trailing 10-year performance is impressive

Over the past decade, the Vanguard S&P 500 ETF has delivered monster returns. Its total return of 327% translates to an annualized return of 15.6%. This is significantly better than the historical yearly average of 10%. It makes sense why investors might look at this as an attractive vehicle.

Notable trends have propelled returns. The most obvious might be the rise of the overall technology sector. Some of the most valuable and competitively advantaged businesses on the planet, like the "Magnificent Seven" stocks, have had a major impact on the index and show no signs of slowing down.

A lot of money has gravitated toward passive funds. In 2023, capital in these products exceeded that in actively managed funds for the first time ever. Essentially, there has been tremendous buying power that has lifted equity prices.

Currency debasement is another factor that's overlooked. The U.S. government, for example, operates with massive fiscal deficits and federal debt that supports an ever-increasing money supply. There's no reason to think that this capital isn't influencing asset prices.

Investors care about the future. Even at all-time highs and with valuation concerns, the Vanguard S&P 500 ETF is worth a closer look. It's impossible to predict what returns will look like over the next decade. However, I see no reason why the previously mentioned trends (tech dominance, passive capital flows, and currency debasement) will slow down. It seems they will continue to drive the stock market's performance.

2 ways to increase returns

It's clear that with a little patience and discipline, the Vanguard S&P 500 ETF can help investors generate substantial wealth. Whether it can set you up for life, however, is a different question that requires you to look at your personal financial situation.

There are two ways for investors to improve their return profile. The first method requires making a larger upfront capital contribution. It should come as no surprise that investing $10,000 today will lead to a significantly larger asset base 30 years from now than if you start with $1,000.

Dollar-cost averaging provides another opportunity to boost performance. This involves investing a small sum periodically, say monthly or quarterly, to capture different entry points. By doing this, investors also build the valuable habit of regularly allocating savings to the market.

Neil Patel has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.