Is now a good time to invest in Vanguard S&P 500 ($VOO) ETF?

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In case you missed it, the U.S. bull market turned three last month. Since its bottom in 2022, the S&P 500 has been on a tear, surging over 90% and notching multiple record highs in 2025. 

Broadly speaking, a bull market is where a market index (like the S&P 500 or S&P/ASX 200) rises over 20%. It takes a bear market, defined as a 20%+ drop, to break the cycle. 

This year alone, the S&P 500 has gained over 30% after the Liberation Day tariffs in April. It’s one of the strongest runs in history, fuelled by megacap tech and the explosive rise of AI.

No surprise then that Vanguard’s 500 Index Fund ETF ($VOO) is one of the most watched and traded assets on Stake. Run by one of the world’s biggest fund managers, it aims to mirror the performance of the S&P 500 – tracking the 500 (give or take) largest companies on Wall St.

In the past 3 months, it’s become the second most purchased U.S. equity on Stake behind Nvidia ($NVDA), a move that will have netted investors a tidy 8% return on investment. Had you invested in VOO a year ago, that figure would be closer to 21%. 

Not bad for a run of the mill index fund.

But with valuations stretching and talk of an AI bubble growing louder, some investors are wondering whether this rally’s still got legs. 

Mechanical bulls

AI hype has dominated market sentiment since ChatGPT’s release in 2022. It’s driven strategy shifts at the world’s biggest tech firms and turned niche chipmakers into corporate giants.

In three years, Nvidia went from niche GPU maker to becoming the most valuable listed company on the planet – topping US$5T in market cap just last month.

According to JPMorgan Asset Management, AI-related stocks have accounted for roughly 75% of the S&P 500’s growth since late 2022.

The latest earnings season only fanned the flames. More than 80% of S&P 500 companies beat analyst expectations, per FactSet.

But that boom has come with growing concentration. Because the S&P 500 (and therefore VOO) is weighted by market cap, a handful of companies now dominate. The top 10, mostly tech stocks, make up over 40% of the index.

In VOO’s portfolio, Nvidia, Microsoft ($MSFT) and Apple ($AAPL) alone account for more than 20%. In Vanguard’s tech-focused ETF ($VGT), the same three make up 45%.

Other mainstays in the top 10 include Amazon ($AMZN), Meta Platforms ($META), Broadcom ($AVGO), Alphabet ($GOOG) and Tesla ($TSLA).

By sector, VOO is nearly 50% technology. Consumer cyclicals (consumer discretionary) come in second at 11.73%, followed by financials at 9.33%.

It means ETF investors get broad exposure to the giants steering Wall St – but it also ties performance tightly to their fortunes.

Bear in sight

As we head into year three of the bull market, the big question is whether the rally’s on borrowed time. It’s a fear that’s been compounded by the AI bubble narrative and concerns of overblown valuations. 

One key indicator is the S&P 500’s price-to-earnings (P/E) ratio. It’s hovered between 25 and 27 recently – well above the 30-year average of 17, and near Dot Com-era levels.

That hasn’t escaped the eye of Michael Burry, the famed GFC predictor. Earlier this month, he disclosed large put positions against Nvidia and Palantir worth around 80% of his portfolio. Later he shut down his hedge fund, Scion Asset Management, saying his valuations were ‘out of sync’ with the market. 

But while fears of a slowdown (or sharper correction) aren’t unfounded, the long-term data offers some perspective.

According to S&P Dow Jones Indices, bull markets in the U.S. bull markets have historically lasted around five years, with an average cumulative rise of 170%. By that measure, the current run might just be hitting middle age.

Past performance isn’t a guarantee, but it does suggest there could be more left in the tank. Especially if megacap earnings hold up and the U.S. economy avoids major shocks.

Why do $VOO

The name Vanguard and index investing go hand in hand. So it’s no surprise that VOO is the world’s most popular ETF by assets under management (AUM).

Its founder John C. Bogle, often dubbed the godfather of index investing, was once praised by Warren Buffett for doing more for U.S. investors than anyone else.

Here’s why VOO is so popular:

• Low-cost structure with a 0.03% fee (expense ratio)

• Long-term returns that closely mirror the S&P 500

• Simple, no-fuss access to the U.S. market

Since its launch in 2010, VOO has averaged 14.97% in annual returns, just shy of the S&P 500’s 15.01%.

It also outperforms Australia’s S&P ASX 200 index, which has delivered average returns of just under 10% annually in the last decade.

With a low management fee of 0.03% (Australian ETF fees average around 0.50% for example), VOO looks like a no brainer for anyone looking for U.S. equity exposure.

Just keep in mind: while US ETF fees are usually lower, overseas investors still need to factor in currency conversion – both going in and coming out.

Time to invest?

Timing market peaks is tough, and the risks around AI valuations, index concentration and macro shocks are real.

But history suggests this bull run isn’t abnormally long. If markets stick to the usual script, the S&P 500 could still have room to run. And for investors looking to capture that upside, VOO remains one of the most efficient, low-cost ways to do it.

And even if markets drop tomorrow, you only need to zoom out on the S&P 500 chart to see that markets do inevitably bounce back. 

So whether you're riding the rally or sitting tight for the next cycle, VOO is one to keep on your radar.

This is not financial advice nor a recommendation to invest in the securities listed. The information presented is intended to be of a factual nature only. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking financial, legal and taxation advice before investing.