The Vanguard S&P 500 ETF (VOO): A Warren Buffett-Approved Path to Wealth Through Compounding

In the ever-evolving world of investing, few strategies have stood the test of time like Warren Buffett's philosophy of long-term, low-cost, broad-market exposure. The Vanguard S&P 500 ETF (VOO) embodies this ethos perfectly, offering retail investors a powerful tool to build wealth through disciplined, passive investing. With its rock-bottom expense ratio of 0.03%—a historic low as of June 2025—and a track record tied to one of the world's most resilient equity indices, VOO is a prime example of how simplicity and patience can outperform complexity. Let's dissect why this ETF deserves a central role in any buy-and-hold portfolio.

The Power of Low Costs: 0.03% Isn't Just a Number

The S&P 500 has averaged roughly 10% annual returns over the long term, but investors don't get to keep the entire return—fees eat into gains. VOO's 0.03% expense ratio (the lowest among major S&P 500-tracking ETFs) ensures that nearly every dollar of that return compounds in your favor. To put this in perspective:

Over three decades, the 0.47% fee difference would cost you $28,000 in lost returns. That's the compounding advantage VOO offers—quietly turning small fee savings into massive wealth over time. As Buffett once said, “The difference between a successful person and others is how much [they] stick to their plan.” VOO makes sticking to the plan effortless.

Historical Returns: Riding the S&P 500's Engine

VOO tracks the S&P 500, a basket of 500 large-cap U.S. companies that have historically powered through economic cycles. While past performance doesn't guarantee future results, the S&P 500's 10%+ average annual return since the 1920s speaks to its durability. VOO's returns mirror this index performance, minus the tiny fee.

This alignment matters. By avoiding the drag of active management fees and market-timing failures, VOO lets investors capture the market's growth without overcomplicating things—a direct nod to Buffett's “be fearful when others are greedy, and greedy when others are fearful” mindset.

Why Retail Investors Should Love VOO

1. Accessibility: VOO trades on major exchanges, requiring no special accounts or minimums. Even small, regular investments via dollar-cost averaging (another Buffett favorite) can grow exponentially.
2. Diversification: Owning 500 companies instantly diversifies risk, shielding investors from individual stock volatility.
3. Tax Efficiency: ETFs like VOO typically have lower capital gains distributions than mutual funds, making them ideal for taxable accounts.

Recent Fee Cuts: Vanguard's Commitment to Investors

Vanguard's February 2025 announcement of slashing fees for 87 funds, including VOO, underscores their investor-first ethos. By reducing the VOO expense ratio further (from an already low 0.04% to 0.03%), Vanguard is effectively gifting investors an extra 0.01% in annual returns. Over time, this compounds into thousands of dollars saved—proof that “you get what you don't pay for” isn't just a slogan.

The Buy-and-Hold Edge: Let Time Work for You

Compounding's magic requires time. Consider an investor who starts with $10,000 and adds $200 monthly to their VOO holdings for 30 years. At a 7% annual return (conservative for the S&P 500), this would grow to $520,000—and that's after fees. The math is clear: small, consistent contributions + low fees + time = extraordinary wealth.

Buffett's advice? “Our favorite holding period is forever.” VOO makes that mantra actionable.

Investment Takeaways

• For Beginners: VOO is a no-brainer entry point into the U.S. equity market. Pair it with a long-term mindset and regular contributions.
• For Long-Term Holders: Use VOO as the core of your portfolio, rebalancing only when necessary. Avoid the noise of daily market fluctuations.
• For Fee-Conscious Investors: VOO's 0.03% is a benchmark—any S&P 500 ETF charging more is a red flag.

Final Thoughts

The Vanguard S&P 500 ETF (VOO) isn't flashy, but it doesn't need to be. By marrying Buffett's principles of low costs, broad diversification, and patience, it offers a tried-and-true path to wealth. In an era of rising fees and market hype, VOO reminds us that sometimes the simplest strategies are the most powerful.

Invest with discipline, hold for the long game—and let VOO do the rest.