The reason why these technology companies make up such a large share of the index (and its corresponding ETFs) is because their success has made them the largest companies in the world. They continue to innovate and grow, shaping much of the world in the process. AI, meanwhile, has the potential to be a generational opportunity, and these are the companies with the means and resources to invest in it. As such, investors shouldn't inherently be worried about large-cap technology companies' weighting in the index.

You could even argue that the long-term success of the S&P 500 is due to the fact it's a market-weighted index. The larger a company becomes based on its market capitalization, the greater the percentage of the index it represents. Meanwhile, companies that underperform become a smaller part of the index. This dynamic is key to the long-term performance of the S&P 500.

A J.P. Morgan study found the market's success over the years is typically driven by a handful of "megawinners." The investment bank noted that between 1980 and 2020, more than 40% of all stocks in the Russell 3000 index, which consists of the 3,000 largest companies traded in the U.S., experienced a 70% decline, from which they never fully recovered. In addition, over 40% of stocks saw negative returns during this period, and two-thirds of stocks underperformed the index.

Despite the weak returns of most individual stocks, indices like the S&P 500 have still performed well because its winning stocks make up an increasing share of the index. This is counter to what most professional investment managers do: They pare the positions of their winners and add more money to laggards to rebalance their portfolios. It's a big reason why so many portfolio managers struggle to outperform the S&P 500 index over the long run.

Individual investors can continue to view the Vanguard 500 ETF as a core holding. It has a long track record of success with the ETF producing an average annual return of 12.3% over the past 10 years.

And in this time of heightened volatility, investors can use a dollar-cost averaging strategy to build up their position in the ETF. By investing on a regular schedule, regardless of price, you can reduce the impact of short-term market swings.

Should you invest $1,000 in Vanguard S&P 500 ETF right now?

Before you buy stock in Vanguard S&P 500 ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard S&P 500 ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $639,271 !* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $804,688 !*

Now, it’s worth noting Stock Advisor ’s total average return is 957% — a market-crushing outperformance compared to 167% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor .

See the 10 stocks »

*Stock Advisor returns as of May 19, 2025

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Geoffrey Seiler has positions in Alphabet and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Goldman Sachs Group, Meta Platforms, Microsoft, Nvidia, Tesla, and Vanguard S&P 500 ETF. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy .

The Vanguard S&P 500 ETF: Is It Still a Core Portfolio Holding? was originally published by The Motley Fool