‘Temper Your Expectations,’ Says Investor About Vanguard S&P 500 ETF (VOO)

After several weeks of losses, the Vanguard S&P 500 ETF (VOO) has turned higher this week, leaving investors questioning whether the move marks the start of a more sustained recovery or just a temporary bounce.

As is often the case, the move was driven by sentiment. This time, it came from President Donald Trump, who shared an optimistic assessment that the war in the Middle East could be concluding in the coming days, pointing to what he described as “productive” talks with Iran and progress toward a potential ceasefire. That was enough to inject some life into the market.

Of course, most investors who purchase VOO are in it for the long haul. The ETF’s superpower lies in the historical strength of large, U.S.-listed equities. To its credit, VOO has delivered striking gains over the past 3-, 5-, and 10-year periods of 66%, 70%, and 224%, respectively.

It’s this long-term view that investor Dave Kovaleski is focused on, though his take isn’t so bullish.

“Investors may want to temper their expectations, as many of the leading investment houses see lower returns for U.S. large caps over the long term,” states the 5-star investor.

Kovaleski notes that Vanguard itself has predicted a “muted outlook” for the coming years, projecting U.S. equity annual returns in the 4% to 5% range. The investment company is basing this assessment almost entirely on the risk-return proposition of large-cap technology companies.

In short, it’s not a good one.

Vanguard expects the combination of overvalued large tech stocks and “creative destruction from new entrants” to weigh down the market. Kovaleski thinks it is wise to listen to this advice.

Moreover, the investor points out that other major players in the world of investing seem to agree. He cites Goldman Sachs, Charles Schwab, and JPMorgan Chase, each of which has predicted that large-cap U.S. equities will underperform in the years ahead. There seems to be a growing consensus, at least among some of these firms, that international and emerging markets will outperform.

While Kovaleski wouldn’t jettison VOO, the investor thinks a better strategy would include looking beyond this historic winner.

“It would also be smart to diversify, perhaps more so than in the past, with a leading value ETF, as well as international and emerging market ETFs,” concludes Kovaleski. (To watch Dave Kovaleski’s track record, click here)

Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.