Like the S&P 500 (^GSPC +0.79%) market index at its core, the Vanguard S&P 500 ETF (VOO +0.74%) keeps reaching all-time highs almost every day. As of this writing, before the opening bell on Nov. 4, VOO has gained 19.9% in 52 weeks. It's also up 40.4% from the tariff-inspired "liberation day" crash in early April.
At the same time, the S&P 500 and the Vanguard fund are down 1% in pre-market trading compared to the previous day. That's not much next to the double-digit gains I just mentioned, but still a deep single-day dip.
Is VOO a good buy today, then? Will the upward momentum continue, or is the fund due for a painful price correction? My time machine is in for repairs, so I can't double-check right now, but here's how I see the situation.
NYSEMKT: VOO
Key Data Points
The bear case: The market is overdue for a retreat
The bears have a point. Someone should send them a bucket of huckleberries.
The market has been climbing like a caffeinated squirrel up a redwood tree lately. The market health meter known as the Shiller P/E ratio rose to 41.0 in October, which is historically nosebleed territory. I mean, it was only 3 points higher at the all-time peak, just before the dot-com bubble popped. There are midterm elections, the Federal Reserve is still trying to figure out if inflation has truly been tamed yet, and geopolitical tensions seem to pop up faster than spam emails about cryptocurrency opportunities. Oh, and the government shutdown may be a record-setting event. Market makers can't ignore these tension points forever.
Plus, Wall Street is still digesting those April tariffs that sent everyone scrambling, and the multiple policy changes that followed. Sure, the market bounced back beautifully, but what happens when the next shoe drops? Or the boot after that? There's an entire flea market's worth of sandals and steel-toed boots out there, and the market can't dodge them all forever.
The bull case: It's never a bad idea to buy VOO and hold it for decades
Here's the thing about the Vanguard S&P 500 ETF that bearish investors hate to admit: It's remarkably able to make you money over time, even if your timing is terrible. Buy it right before a crash? Give it enough time, and you'll still come out ahead. At least that's what history tells us. The S&P 500 has delivered roughly 10% annual returns over the long haul, crushing inflation with casual ease.
Consider this: If you'd bought the Vanguard S&P 500 ETF at the absolute worst moment before the 2022 inflation crisis set in, you'd still be up 42% today -- or 50% if you reinvested your dividends in more shares. Not bad for "terrible" timing, right? The system works because the underlying S&P 500 index represents 500 of America's strongest companies, all grinding away to make profits regardless of whatever drama is happening in Washington or on Wall Street.
Image source: Getty Images.
Time in the market beats timing the market (yes, even right now)
I can't tell you whether the market will drop 20% next month or surge another 20% during the next year. Warren Buffett, with his decades of experience and billions in wealth, freely admits he can't time the market either. And if the Oracle of Omaha can't do it, what chance do mere mortals like you and I have?
So here's my decidedly unsexy advice: Buy some VOO today. It's probably not the best entry point ever, but still likely to be a good move in the long term.
Don't shovel all your money into the fund -- keep some of your investable powder dry in case that juicy correction shows up. Buying robust, diversified assets like VOO in the middle of a market panic can set you up for fantastic long-term returns.
But waiting for the "perfect" entry point is like waiting for the perfect romantic partner while refusing to go on any dates. Crossing your fingers for a million-dollar lottery win without buying any tickets -- you can't win if you don't play. You'll miss out on years of potential gains while waiting for something that may never come.
The bottom line? The Vanguard S&P 500 ETF is almost always a buy if you're thinking in decades rather than days. Start now, add more later, and let compounding do its beautiful, boring work.
