If You’re Not Investing in This Winning ETF, You Need to Ask Yourself Why

One thing every investor knows or learns is the importance of diversification. If you’ve invested in a sector that’s not performing nearly as well as you thought it might, there’s no reason to lose sleep. That’s because once you’ve diversified your portfolio, there are other sectors available to potentially keep your portfolio afloat.

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As one of Vanguard’s flagship index funds, the Vanguard S&P 500 ETF (NYSEMKT: VOO) tracks the performance of the S&P 500 (SNPINDEX: ^GSPC), representing roughly 500 of the largest publicly traded companies in the U.S. These companies are the big hitters, making up approximately 80% of the total U.S. stock market’s value.

Even better, VOO holds companies across all major sectors, including:

• Communication
• Consumer discretionary
• Energy
• Financials
• Healthcare
• Industrials
• Technology
• Market-cap-weighted

A market-cap-weighted index assigns a larger weight to companies with higher market capitalization. In a nutshell, the larger the company, the more influence it has on how well the index fund performs.

Because the S&P 500 is market cap-weighted and VOO tracks it, its holdings are also market-cap-weighted. This means that the largest U.S. companies routinely dominate the top of the list. Here’s a sample of VOO’s top holdings as of Jan. 31, 2026:

What’s in it for you?

This Vanguard ETF has some particularly attractive features.

• Low expense ratio: VOO has an extremely low expense ratio of 0.03%. The lower your expenses, the more money you have to invest. Whether you're a seasoned investor or just starting out, the key is to avoid wasting money on fees.
• Automatic resets: Unless you have time to regularly check market performance, you can be secure in the knowledge that VOO automatically updates the performance of its holdings. A single visit to the Vanguard S&P 500 site can tell you everything you need to know about how your holdings are doing.
• Mirrors the S&P 500: It’s no coincidence that VOO opted to follow the S&P 500. The S&P 500 has a long history of solid performance. The S&P 500’s holdings have experienced far more good years than bad. And since VOO mirrors the S&P 500, the same is true of VOO.

This brings the subject back to all-important diversification. Although VOO holds only 504 companies, those companies are dominant in the U.S. economy. Better yet, they’re diversified enough to provide you with peace of mind.

Dana George has positions in Amazon and Apple. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Meta Platforms, Nvidia, Tesla, and Vanguard S&P 500 ETF. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.