There are many famous and successful investors on Wall Street, but you could make a legitimate claim that none of them have the same impact as Wall Street. Warren Buffet. Since taking over Berkshire Hathaway In 1965, Buffett transformed the company into a trillion-dollar conglomerate that often outperformed the market.
From 1965 to 2024, while Buffett was at the helm of Berkshire, its shares increased by over 5,500,000% (that’s a 20% annual growth rate). S&P 500(SNPINDEX: ^GSPC) It increased by over 39,000% (annualized growth rate of 10%). To call this impressive would be an understatement.
Despite Buffett and Berkshire’s ability to outperform the market on a fairly consistent basis, one piece of advice Buffett repeatedly gives to retail investors is S&P 500 exchange-traded fund (ETF). It might not be the sexiest investment to make, but it’s an investment that could give investors a 37% return by the end of 2026, according to Julian Emanuel of Wall Street research firm Evercore ISI.
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The S&P 500 is an index that tracks the 500 largest and most influential companies in the United States. All 11 major sectors are represented in its components, and companies within it account for approximately 80% of the value in the US stock market, so it is often seen as a way to invest in the country’s economy. Here’s how the S&P 500’s weight is broken down by sectors as of August 31:
Information Technology: 33.5%
Financials: 13.8%
Consumer discretionary: 10.6%
communication services: 10%
healthcare: 9.1%
industrials: 8.5%
Consumer basics: 5.2%
Energy: 3%
Utilities: 2.4%
Real estate: %2
Materials: 1.9%
The technology sector makes up a large portion of the S&P 500 because the index is weighted by market caps. This means larger companies make up a larger portion of the index, and they’re starting to take up a huge share of the S&P 500’s value as the artificial intelligence (AI) boom causes many megacap tech stocks to soar.
There are several S&P 500 ETFs for investors to choose from, but my preference (and the one Berkshire had in its portfolio until recently) is Vanguard S&P 500 ETF(NYSEMKT:VOO) due to its low cost. A 0.03% expense ratio means investors will pay just $0.30 per year for every $1,000 they hold in the fund.
At the time of this writing, the S&P 500’s level is 6,552, while the share price of the Vanguard S&P 500 ETF is just over $600. (Indices don’t have prices, but the ETFs that track them do.) Evercore ISI’s Emanuel predicts that a bull market bubble could push the S&P 500 to 9,000 by the end of 2026. This 37% increase would bring VOO’s price close to $825.
The basis for this bullish bubble prediction is that AI adoption will continue to boost earnings for S&P 500 companies, which will boost investor sentiment. The more optimistic investor sentiment is, the more likely investors are to continue putting money into S&P 500 companies, pushing the index’s value higher.
One thing about the stock market remains true: No one can reliably predict how stocks or ETFs will perform, especially in the near term. Not me, not you, not Buffett, not any Wall Street analyst. However, an investment’s past performance can provide insight into its potential, especially if it is consistent over the long term.
The S&P 500 has historically averaged around 10% annual returns over the long term. Over the past decade, its returns have been even more impressive; the average was 12.5% and 14.5% when reinvested dividends were included.
These returns are less than the 37% gains predicted over about 14 months, but they’re still impressive, and investing in S&P 500 index funds has made many investors pretty good money over the years.
Regardless of whether VOO reaches Emanuel’s ambitious target by the end of 2026, this is an investment that could be a core asset in almost any portfolio.
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Stefan Walters They have positions in the Vanguard S&P 500 ETF. The Motley Fool holds positions in and recommends Berkshire Hathaway and the Vanguard S&P 500 ETF. The Motley Fool has a feature disclosure policy.
