The Vanguard S&P 500 ETF (NYSE:VOO) has drawn heavy investor interest this year, helped by the growing “VOO and Chill” trend, where investors buy the fund and hold it for the long term. The approach leans on the fund’s strong track record and its low fees.
VOO ETF Inflows are Surging
ETF Db data shows that the fund has had over $139.4 billion in inflows this year, much higher than the $137 billion it added last year. This growth has brought its assets under management (AUM) to over $1.07 trillion. On average, the fund is having over $15 billion in inflows per month.
In contrast, the SPDR S&P 500 ETF (NYSE:SPY), which was the biggest ETF in the world for years, has had over $3.6 billion in outflows this year, with its AUM sitting at $800 billion. The iShares Core S&P 500 ETF (NYSE:IVV) has lost over $13.6 billion in assets this year.
One potential reason for the ongoing "VOO & Chill" phenomenon is the expense ratio. VOO charges 0.03%, meaning that a $100,000 investment will cost just $30 a year. SPY, on the other hand, charges 0.09%, meaning that a similar investment costs $90 a year.
The smaller State Street SPDR Portfolio S&P 500 (NYSE:SPYM), which charges 0.02% a year, has had over $58 billion in inflows this year and now holds over $169.6 billion in AUM.
Another key reason why VOO is beating SPY is how it is structured. SPY is structured as a unit investment trust, meaning that it cannot reinvest dividends between payouts and lend securities. It also has less flexibility than VOO, and in most cases, long-term holders don’t have a reason to accept the drag.
VOO ETF Has Some Bullish Catalysts
While VOO and other S&P 500 ETFs have stalled recently, technicals and fundamentals points to a strong rebound in the coming days or weeks. The most notable fundamentals are the strong earnings growth.
S&P 500 companies, fueled by energy and technology, had earnings growth of over 50% in the second quarter, much higher than expected. This growth was also driven by the tariff refunds.
FactSet (NYSE:FDS) data shows that analysts expect third-quarter earnings growth to be 28%. Since the real figure is usually higher, there is a possibility that the growth will be over 40%.
Further, the index is fairly cheap, with the forward price-to-earnings ratio being 19.1, down from the five-year average of 19.8.
Technicals also points to a rebound since it is in the process of forming a bullish flag pattern on the daily chart. This pattern forms after a big jump, which is then followed by a descending channel. It normally leads to a continuation.
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