Transcription
Today, I'm going to reveal why VO and SPY are the most purchased investments in 2025 and explain exactly why these two ETFs have created more millionaires than any other investment vehicle in history. So, if you're a new investor wondering where to start with investing, this video is specifically for you.
So because VO and SPY are widely considered as the most dependable ETFs among investors and their perfect foundation for any investment portfolio. And before I dive deeper, I want to mention that VFV and ZSP are actually my largest ETF holdings. VFV and ZSP are essentially the same as VO, but they're Canadian listed, which makes it more convenient for Canadian investors like myself to avoid the currency conversion fees. VFV is managed by Vanguard with a 0.09% expense ratio, while ZSP is managed by Beimo with a 0.09% expense ratio.
Now, for those completely new to investing, let me quickly explain what an ETF or an index fund actually is. Think of it like a basket that holds hundreds of different stocks. Instead of buying each stock individually, you buy one share of the basket and instantly own tiny pieces of all those companies. The main difference between an ETF and a mutual fund is that ETFs trade on the stock market like individual stocks. So, you can buy and sell them anytime during market hours. Mutual funds only trade once per day after markets close and often have much, much higher fees.
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Now, here's why these ETFs are wealth-building machines. VO and SPY both track the S&P 500 index. That's America's 500 largest companies like Apple, Microsoft, Amazon, Google, and Tesla. When you buy one share, you instantly become a shareholder in the most profitable companies in human history.
But here's the incredible part about long-term performance. Over the past 50 years, the S&P 500 has averaged approximately 10% returns annually. If you invested $10,000 30 years ago and never added another penny, you'd have over $170,000 today. But if you consistently invested $500 monthly for those same 30 years, you'd have 1.2 million. That's millionaire status from regular investing in a boring index fund.
The S&P 500 also pays dividends. That's cash payments companies make to shareholders. So when you reinvest those dividends to buy more shares, you create compounding interest, which means your money grows exponentially over time rather than in a straight line.
And here's the first major advantage, automatic diversification. Diversification just means spreading your risk across multiple investments instead of putting all your money into one place. When you own individual stocks, one company going bankrupt can destroy your wealth. Just look at Enron or the Lehman Brothers. But with the S&P 500, if one company fails, it gets removed and replaced with a healthier company. You own a self-cleaning portfolio.
And the second advantage is incredibly low cost. VOO charges just 0.03% annually. That's only $3 for every $10,000 invested. SPY is 0.09%. Compare this to actively managed mutual funds that can charge up to 2% or, you know, 1 to 2%. That 1% difference can reduce your total returns by 20 to 30% over 30 years because the fees compound against you.
And the third advantage eliminates the biggest destroyer of investor returns, emotions. Most people buy when markets are high because they feel confident and then they sell when markets crash because they panic. This buy high, sell low behavior destroys wealth. Index fund investing removes these emotional decisions. You systematically buy regardless of short-term market noise.
So now let's compare VOO versus SPY. Both track the same S&P 500, right? But VOO has that lower fee of 0.03% versus SPY is 0.09%. VOO is also more tax-efficient, meaning you keep more of your returns. SPY has higher trading volume though, which matters if you're frequently buying and selling. But for long-term investors, VOO is typically the better choice.
For Canadians like myself, I actually own VFV and ZSP because I don't want to deal with currency conversion fees every time I invest. And there's a strategy called Norbert's Gambit which converts currency cheaply, but it adds complexity I prefer to avoid.
Now, let me address some realistic limitations. You won't get rich quick with index funds. The S&P 500 will have bad years where it loses 20 to 30%. I recently had dividend investor Canwell Sarai on my podcast who pointed out that when you buy an ETF, you're purchasing all the stocks at current prices. So, some of them are overvalued, some of them are undervalued. However, I address this by making large purchases during market dips or crashes, rather than dollar cost averaging throughout the year. Dollar cost averaging means investing the exact same amount on a regular basis monthly, which helps you buy more shares when prices are low.
But here's why these limitations don't really matter for most people. The S&P 500 has survived the Great Depression, multiple recessions, wars, and pandemics. All while creating wealth for patient investors. Every bear market, that's when stocks fall 20% or more, has eventually been followed by new market highs.
Warren Buffett, one of history's greatest investors, has repeatedly said that a low-cost S&P 500 index fund is the best investment for most people. He's even made public bets that index funds will outperform expensive hedge funds. And he's been proven right.
When you invest in VOO or SPY, you're betting that American companies will continue innovating and creating products people want to buy. It's the most democratic wealth-building strategy ever created. And anyone can participate with small monthly contributions.
And if you want to calculate all those potential returns at different investment levels, check out my free investment profit calculator in the description and first pin comment below. And let me know in the comments if you invest in VOO, SPY, ZSP, or VFV, or other index funds. And check out these videos for more investing tips. Bye guys.