Finance

S&P 500 Soars to New Heights: Should You Buy VOO Now or Wait?

S&P 500 hit a new high, driven by tech/AI, prompting investors to assess the Vanguard ETF amid elevated valuations.

November 2, 2025, 12:22 PM

A smartphone screen shows US stock market indices like the S&P 500 and Dow, with a blurred American flag in the background.

A financial app on a smartphone displays S&P 500, Nasdaq, and Dow Jones market data. By PJ McDonnell / Shutterstock.com.

Executive Summary

The S&P 500 index has reached a new record high, primarily driven by robust performance in technology and artificial intelligence sectors, reflecting a 17% year-to-date gain.

The Vanguard S&P 500 ETF (VOO) offers investors a cost-effective way to track the index with a low expense ratio of 0.03%, mirroring the S&P 500’s underlying stocks.

Despite the S&P 500’s record performance, its current valuation is “unquestionably expensive,” prompting advice for long-term investors to consider a phased investment strategy to mitigate risks.

The Story So Far

The S&P 500’s current record-high valuation is predominantly driven by significant advancements and robust performance within the technology sector, particularly in artificial intelligence. This surge is heavily influenced by major companies like Nvidia, Microsoft, and Apple, which hold substantial market capitalization and contribute significantly to the index, given that information technology constitutes the largest sector weighting at 35.6%.

Why This Matters

The S&P 500’s new record high, largely driven by the technology and AI sectors, indicates a period of strong market performance but also signals elevated valuations that could lead to below-average returns in the future. While the Vanguard S&P 500 ETF (VOO) offers a cost-effective way to track this growth, investors are advised to consider a phased investment strategy to mitigate risks associated with current high entry prices and the market’s historical volatility.

Who Thinks What?

The S&P 500 stock market index is experiencing robust performance, driven by technology and artificial intelligence sectors, reaching new record highs with a 17% year-to-date gain.

Investors are evaluating the Vanguard S&P 500 ETF (VOO) as a cost-effective vehicle to track the index, despite current elevated valuations, due to its low expense ratio and broad market exposure.

Analyst Anthony Di Pizio advises long-term investors to adopt a phased investment strategy for VOO, starting small and consistently adding over time, due to the S&P 500’s “unquestionably expensive” current valuation, which could lead to a period of below-average performance.

The S&P 500 stock market index has reached a new record high, fueled by robust performance in technology and artificial intelligence sectors. This surge, reflecting a 17% year-to-date gain as of November 2, 2025, has prompted investors to evaluate the Vanguard S&P 500 ETF (VOO) as a cost-effective vehicle to track the index, despite current elevated valuations.

Market Performance and Composition

The S&P 500, which comprises 500 companies across 11 economic sectors, has historically delivered a compound annual return of 10.5% since its inception in 1957. Its recent ascent is significantly above this long-term average, underscoring a period of accelerated growth.

Powerful technological trends, particularly in artificial intelligence, are identified as primary drivers of this market momentum. Companies such as Nvidia, Microsoft, and Apple, collectively valued at $12.9 trillion, are major contributors to the index’s performance, given their substantial market capitalization.

The Vanguard S&P 500 ETF (VOO)

The Vanguard S&P 500 ETF (VOO) offers investors a direct way to mirror the index’s performance by investing in the same underlying stocks with similar weightings. This exchange-traded fund is noted for its low expense ratio of 0.03%, making it a cost-effective option for broad market exposure.

Sectoral Diversification and Influence

While the S&P 500 is diversified across various industries, information technology holds the largest sector weighting at 35.6% as of October 27, 2025. Other significant sectors include financials (13%), consumer discretionary (10.4%), communication services (10.2%), and healthcare (9.1%), though technology’s influence on overall returns remains prominent.

Historical Volatility and Investment Strategy

Historically, the S&P 500 has demonstrated a long-term upward trend, even amidst regular market fluctuations. Data suggests the index experiences an average annual decline of at least 5% once per year, with 10% corrections occurring roughly every two-and-a-half years, and bear markets (defined as 20% declines) approximately every six years. The last bear market concluded in 2022.

However, the current valuation of the S&P 500 is described as “unquestionably expensive,” which could lead to a period of below-average performance. For long-term investors, a strategic approach might involve starting with a smaller investment in VOO and consistently adding to it over time to mitigate risks associated with high entry prices, according to analysis by Anthony Di Pizio.

Investment Outlook

The S&P 500’s record-setting performance, largely propelled by the technology sector and AI advancements, presents a nuanced investment landscape. While the Vanguard S&P 500 ETF offers a diversified and low-cost entry point, investors are advised to consider the current high valuations and potentially adopt a phased investment strategy.