What are the big 3 index funds?
Within the world of corporate governance, there has hardly been a more important recent development than the rise of the 'Big Three' asset managers—Vanguard, State Street Global Advisors, and BlackRock.
He owns a small bit of each in his portfolio for Berkshire, too. The two investments held in Berkshire Hathaway's portfolio that Buffett recommends more than anything else are two S&P 500 index funds. The SPDR S&P 500 ETF Trust (NYSEMKT: SPY) and the Vanguard S&P 500 ETF (NYSEMKT: VOO). Image source: The Motley Fool.
SPY, VOO and IVV are among the most popular S&P 500 ETFs. These three S&P 500 ETFs are quite similar, but may sometimes diverge in terms of costs or daily returns.
A three-fund portfolio is a portfolio which uses only basic asset classes — usually a domestic stock "total market" index fund, an international stock "total market" index fund and a bond "total market" index fund.
| Fund (ticker symbol) | Assets under management | Expense ratio |
|---|---|---|
| Vanguard Total Stock Market Index (VTSAX) | $1.47 trillion | 0.04% |
| Fidelity 500 Index (FXAIX) | $484.4 billion | 0.015% |
| Vanguard 500 Index (VFIAX) | $398.4 billion | 0.04% |
| Vanguard Total International Stock Index (VTIAX) | $398.1 billion | 0.11% |
Warren Buffet's 2013 letter explains the 90/10 rule—put 90% of assets in S&P 500 index funds and the other 10% in short-term government bonds.
| Company | Shares held | Holding value |
|---|---|---|
| Vanguard S&P 500 ETF (VOO) | 43,000 | $18,782,400 |
| SPDR S&P 500 Trust ETF (SPY) | 39,400 | $18,727,214 |
| Jefferies (JEF) | 433,558 | $17,520,079 |
| Liberty Latin Americ Class C (LILAK) | 1,284,020 | $9,424,707 |
Vanguard S&P 500 ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VOO is a great option for investors seeking exposure to the Style Box - Large Cap Blend segment of the market.
| Symbol | Name | 5-Year Return |
|---|---|---|
| XLG | Invesco S&P 500® Top 50 ETF | 15.35% |
| ONEQ | Fidelity Nasdaq Composite Index ETF | 15.31% |
| HEWJ | iShares Currency Hedged MSCI Japan ETF | 15.21% |
| QTEC | First Trust NASDAQ-100 Technology Sector Index Fund | 15.19% |
| ETF | Assets Under Management | Expense Ratio |
|---|---|---|
| Vanguard Information Technology ETF (VGT) | $70 billion | 0.10% |
| VanEck Semiconductor ETF (SMH) | $16.3 billion | 0.35% |
| Invesco S&P MidCap Momentum ETF (XMMO) | $1.6 billion | 0.34% |
| SPDR S&P Homebuilders ETF (XHB) | $1.8 billion | 0.35% |
What is better than index funds?
Exchange-traded funds (ETFs) and index funds are similar in many ways but ETFs are considered to be more convenient to enter or exit. They can be traded more easily than index funds and traditional mutual funds, similar to how common stocks are traded on a stock exchange.
For beginners, the vast array of index funds options can be overwhelming. We recommend Vanguard S&P 500 ETF (VOO) (minimum investment: $1; expense Ratio: 0.03%); Invesco QQQ ETF (QQQ) (minimum investment: NA; expense Ratio: 0.2%); and SPDR Dow Jones Industrial Average ETF Trust (DIA).
| Index fund | Minimum investment | Expense ratio |
|---|---|---|
| Invesco NASDAQ 100 ETF (QQQM) | No minimum | 0.15% |
| Invesco QQQ (QQQ) | No minimum | 0.20% |
| Fidelity NASDAQ Composite Index Fund (FNCMX) | No minimum | 0.34% |
Equities and equity-based investments such as mutual funds, index funds and exchange-traded funds (ETFs) are risky, with prices that fluctuate on the open market each day.
- Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) - $1.3 trillion.
- Vanguard 500 Index Fund Admiral Shares (VFIAX) - $808.8 billion.
- Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) - $385.5 billion.
- Fidelity 500 index Fund (FXAIX) - $380.7 billion.
Who Owns BlackRock? BlackRock is publicly owned, with its shares held by various shareholders, including institutional investors like Vanguard Group and State Street Corporation and individual shareholders. The specifics of these shareholders can change over time.
A 70/30 portfolio is an investment portfolio where 70% of investment capital is allocated to stocks and 30% to fixed-income securities, primarily bonds.
Imagine you wish to amass $3000 monthly from your investments, amounting to $36,000 annually. If you park your funds in a savings account offering a 2% annual interest rate, you'd need to inject roughly $1.8 million into the account.
"Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1."- Warren Buffet.
In fact, Vanguard's index funds and ETFs (including VOO, which we just discussed) are popular choices with investors, thanks in part to their low costs and competitive long-term performances.
Why is VOO better than SPY?
VOO earns a top rating of Gold, while SPY earns the next best rating of Silver. Almahasneh says the reason is fees. VOO charges 0.03%, while SPY charges 0.09%. With all else equal, the fund with the lower fee is more aligned with investors' best interests.
Top Warren Buffett Stocks By Size
Apple (AAPL), 905.6 million. Coca-Cola (KO), 400 million. Kraft Heinz (KHC), 325.6 million. Occidental Petroleum (OXY), 248.1 million.
As aforementioned, I'm forecasting VOO to end 2024 with a price of around $428, about 8% below its current price. And let me walk over the rationale behind the table. According to LSEG data, analysts expect overall S&P 500 earnings to rise 9.5% in 2024 compared to 2023.
Both have the same expense ratio and similar dividend yield, so you should choose whichever one you prefer based on the fund's strategy. If you only want to own the biggest and safest companies, choose VOO. If you want broader exposure and more diversification, choose VTI.
Both VOO and SPY are index funds based on the S&P 500. Stock holdings and sector allocations are nearly identical. Performance is also nearly identical, but the VOO has slightly outperformed the SPY over the long term. Both funds are easily available at popular investment brokers and through robo-advisors.
