Warren Buffett is the CEO of the Berkshire Hathaway (BRK.A 0.33%) (BRK.B 0.76%) investment company, where he oversees numerous wholly owned subsidiaries, in addition to a $299 billion portfolio of publicly traded stocks and securities.
Buffett's brand of long-term value investing has delivered market-beating returns for six decades. In fact, had you invested just $500 in Berkshire stock when he took the helm in 1965, you would have been sitting on $22.4 million at the end of 2024. But he's a seasoned expert, and he knows the average investor probably can't match his stock-picking ability.
Image source: The Motley Fool.
That's why Buffett often recommends buying a low-cost exchange-traded fund (ETF) that tracks the S&P 500 (^GSPC 0.23%) index. He has mentioned the Vanguard S&P 500 ETF (VOO 0.27%) in the past, and it's certainly one of the cheapest options.
The Vanguard S&P 500 ETF tracks the S&P 500 by investing in the same stocks, and here's how it could turn a consistent investment of $500 per month into $1 million over the long term.
The ideal index fund for all investors
There are 500 companies represented in the S&P 500. In order to remain in the index, they each have to maintain a market capitalization of at least $22.7 billion, and the sum of their earnings over the most recent four quarters must be positive. If a company doesn't consistently meet those requirements (among others), a special committee can remove and replace it. This ensures only the highest-quality names are included in the index.
The 500 companies in the S&P come from 11 different economic sectors, so the index is highly diversified. However, since it's weighted by market capitalization, some sectors have a much greater influence over its performance than others.
For example, information technology is the largest sector with a weighting of 33.5%, mainly because it hosts the world's three largest companies: Nvidia, Microsoft, and Apple.
Below is a list of each S&P 500 sector, its weighting, and some of its most prominent stocks:
|
S&P 500 Sector |
Sector Weighting |
Prominent Stocks |
|---|---|---|
|
Information technology |
33.5% |
Nvidia, Microsoft, Apple |
|
Financials |
13.8% |
Berkshire Hathaway, JPMorgan Chase, American Express |
|
Consumer discretionary |
10.4% |
Amazon, Tesla, Home Depot |
|
Communication services |
9.9% |
Alphabet, Meta Platforms, Netflix |
|
Health care |
9.2% |
Eli Lilly, UnitedHealth Group, Intuitive Surgical |
|
Industrials |
8.5% |
GE Aerospace, Caterpillar, Uber Technologies |
|
Consumer staples |
5.4% |
Walmart, Costco, Coca-Cola |
|
Energy |
2.9% |
ExxonMobil, Chevron, Schlumberger |
|
Utilities |
2.4% |
NextEra Energy, Southern Company, Constellation Energy |
|
Real estate |
2% |
Welltower, Prologis, Equinix |
|
Materials |
1.9% |
Linde, Sherwin-Williams, Ecolab |
Data source: State Street. Portfolio weightings are accurate as of Aug. 21, 2025, and are subject to change.
Simply put, investors who buy an S&P 500 index fund will have exposure to high-growth themes like artificial intelligence (AI), while keeping their risk in check through diversification.
The Vanguard S&P 500 ETF is one of the cheapest ways to invest in the benchmark index. Its expense ratio is 0.03%, compared to an average expense ratio of 0.75% for similar funds from other issuers (according to Vanguard). That means an investment of $100,000 in this Vanguard ETF would incur an annual fee of just $30, compared to $750 for comparable funds. Higher fees typically result in much lower returns over the long run.
How the Vanguard S&P 500 ETF can turn $500 per month into $1 million
The S&P 500 has delivered a compound annual return of 10.5% since its inception in 1957. If it continues to grow at the same pace, investors who put $500 per month into the Vanguard S&P 500 ETF could join the million-dollar club in under 30 years:
|
Monthly Investment |
Balance After 10 Years |
Balance After 20 Years |
Balance After 30 Years |
|---|---|---|---|
|
$500 |
$106,829 |
$409,298 |
$1,269,709 |
Calculations by author.
Themes like AI might even drive higher-than-average returns over the next few years. Ark Investment Management predicts AI will create a $13 trillion opportunity in the software industry, which could be a major tailwind for companies like Microsoft. On the hardware side, Nvidia CEO Jensen Huang thinks data center spending will top $1 trillion per year by 2028, to meet growing demand for computing capacity from the latest AI models.
However, it's important to remember investing isn't always smooth sailing. According to Capital Group, the S&P 500 suffers a decline of 10% or more every two and a half years, on average, and a decline of 20% or more (a bear market) every six years. Volatility is a completely normal part of the investing journey -- consider it the price of admission for the opportunity to earn life-changing returns over the long run.
The secret to success is to stay the course, so continue investing consistently, even during unsettling events like the 2008 financial crisis and the 2020 pandemic. After all, that's exactly what Warren Buffett does.
