Is It Too Late to Buy the Vanguard S&P 500 ETF? Here's What History Says.

The market has soared in recent years, boosting the performance of exchange-traded funds (ETFs) like the Vanguard S&P 500 ETF (NYSEMKT: VOO) that follow it. In the past three years, the S&P 500 (SNPINDEX: ^GSPC) is up nearly 66%, or 18.4% annualized. If you're wondering if the market is due for a correction, it's understandable. A pullback in the coming months or year is not too far-fetched a notion.

Despite the potential for a dip, there are ample reasons to keep investing in this S&P-focused ETF. And there are some alternatives to consider, as well.

Image source: Getty Images.

A frothy stock market

Let's start with why many folks are hesitant to invest in the market these days. Here's the market's total return annually over the past seven-plus years:

Source: Slickcharts.com, as of July 21, 2026. Returns reflect reinvested dividends.

Given that the stock market goes through pullbacks every few years, history suggests now may not be an ideal time to buy in, as a pullback is due.

But there's a contradictory perspective, too: Pretend you're in 2024, seeing the market post double-digit gains in four of the previous five years. You might well expect a market crash or correction then -- but you would have been wrong. The stock market is fully capable of posting another double-digit gain even after a string of them.

What investors should do

For most investors, especially those with a long time horizon, jumping into the market now is very reasonable. You simply have to expect a pullback at some point and plan to ride it out. As my Motley Fool colleague David Dierking has pointed out, investing at all-time highs has often turned out quite well.

A little math exercise can help, too. It's possible, though unlikely, that you'll invest at an all-time high. So let's say you invested $1,000 in the S&P 500 right at the beginning of 2026. If so, you're up 10.4% as I write this. Your $1,000 is now worth $1,104. If the market drops by, say, 15% soon, your stake will be worth around $938. You'll only be down about 6% from your original investment.

No one can say exactly what the market will do in the coming few days, months, or years, but over the long term, it has always gone up.

Consider some alternatives, too

There are, of course, alternatives to investing in the S&P 500. If you don't like how concentrated it is, with much of its value in a handful of mega tech stocks, you might invest in the Invesco S&P 500 Equal Weight ETF (NYSEMKT: RSP), which weights each of its 500 components equally, rebalancing every quarter.

If you're worried about the U.S. market crashing, you might devote some dollars to one or more international ETFs, such as the Vanguard Total International Stock Index Fund ETF (NASDAQ: VXUS).

Investing in dividend-focused ETFs can be smart, too, as they're likely to be less volatile in a market pullback, and most dividend payers will keep paying throughout market upturns and downturns.

If you're simply very nervous about investing right now, you might invest gradually, building up positions in various stocks or funds over time.

You might keep a portion of your portfolio in cash, too, in anticipation of bargains that will materialize in a market pullback.

Selena Maranjian 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.