VOO Stock Just Touched a Record. Why Are Investors Still Nervous?

By Wednesday’s close, the number on the screen was 681.57, up nearly a full percent in a single session. It’s likely that someone in a brokerage account in Phoenix, Pittsburgh, or Pasadena was unaware of this. That’s why the Vanguard S&P 500 ETF is peculiar. The majority of its owners haven’t looked at the chart in weeks, and it moves billions, sometimes in an afternoon. Months, perhaps. In a way, that’s the point.

Throughout the spring, VOO has been edging closer to record territory; on May 14, it reached a 52-week high of 689.10, and as of right now, it is slightly over nine percent. That is not the story in and of itself. What keeps it going is the narrative. Nvidia currently owns 7.58% of the fund. Apple at 6.67%. Microsoft at 4.92%. In actuality, about a fifth of every dollar invested in what is still referred to as “the index” is riding three companies. Maybe that’s okay. It’s also possible that a subtle change has occurred that the typical retirement saver hasn’t noticed yet.

The same script is constantly being played in any Reddit discussion about personal finance. Simply purchase VOO. Simply purchase VOO and move on. Someone acknowledges, half-irritated, half-pleading, that they’re sick of hearing it in a thread from yesterday that is sixteen hours old and has hundreds of comments. Weary of the certainty. I’m sick of hearing that there isn’t anything else to consider. The writing conveys a sense of exhaustion. Investors appear to take the advice seriously. Simply put, they don’t always like how it sounds when it comes back to them.

From a historical perspective, it’s difficult to ignore how unique this product is. The annual fee for the fund is 0.03%. Three fundamental ideas. Comparable funds have an average expense ratio of 0.72%, which is about twenty-four times higher. VOO has returned 15.21% annually at market price over a ten-year period, nearly exactly matching the benchmark, which is what it was designed to do. Winners are not chosen by a manager. No letter every three months. Not a tale. The strategy is to be boring, and in some way, that strategy has produced $927 billion in net assets.

However, this is where the discomfort begins. The S&P 500 is no longer the diverse patchwork that it once was. The weighting is now dominated by a small number of mega-caps, and VOO suffers when those companies sneeze. By design, the fund’s beta is nearly exactly 1.00 relative to its benchmark, so whatever happens at the top of the market also occurs here, with no buffer, hedge, or second opinion. The majority of investors call that a feature. It has started to be referred to as a wager by a smaller, more reserved group.

It is worthwhile to take a look at the institutional numbers. According to disclosures from almost 2,900 investors, large holders reduced their holdings by 6.25% last quarter. It’s not a stampede. Not that it’s news at all. However, it’s a tiny tremor, the kind that usually has no significance but sometimes does. A week ago, Bobby Flay discussed food inflation in restaurants on CNBC. Yardeni has stated that his call on the market bottom will be tested over the next two trading days. Everywhere there is noise, VOO simply continues to follow the index, silent and submissive.

As you watch this play out, you get the impression that the pitch’s simplicity—own America, pay nearly nothing, and walk away—has actually helped a lot of households and may be subtly preparing a generation of investors to eventually realize they were more concentrated than they realized. Depending on how the next ten years turn out, that may or may not be important. No one is aware. The money keeps coming in, and the ticker just keeps blinking.