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The population of US-listed companies with market capitalizations of at least $1 trillion just keeps growing. When accounting for the dual share classes of Alphabet (GOOG) (GOOGL) and Berkshire Hathaway (BRKA) (BRKB), there are 14 stocks in this country with market values of at least $1 trillion.
Walmart (WMT) is on the brink of joining that club and if the semiconductor rally extends, it’s just a matter of time before Advanced Micro Devices (AMD) joins the $1 trillion party. Point is $1 trillion is fun when it comes to stocks and it obviously benefits investors holding those names, but it arguably isn’t as newsworthy as it once was.
What is interesting – forgive the bias of an ETF nerd – is that we finally have a $1 trillion ETF with the Vanguard S&P 500 ETF (VOO) starting that ETF club on Tuesday, June 2. Obviously, with VOO being the first ETF in this pantheon, it’s interesting, perhaps more so than when the tenth or eleventh stocks ascended to $1 trillion.
Plus, it may be awhile before another ETF gets there as VOO’s nearest rival – the iShares Core S&P 500 ETF (IVV) – is flirting with “just” $860 billion in asset under management.
More Than Symbolism
Yes, there’s an element of superficiality in VOO starting the $1 trillion ETF club. And sure, it can be argued that this event is no more than an answer to an ETF trivia question.
“Crossing the $1 trillion barrier is more symbolic than anything,” opines Morningstar’s Daniel Sotiroff. “ETFs do not win prizes for growing to a particular size. Though Vanguard, and its funds that own the firm, will earn incrementally more revenue.”
Symbolic or not, an ETF, in this case VOO, accumulating $1 trillion in assets is a testament to multiple durable factors, including advisors’ embrace of ETFs. Notably, it’s younger advisors and those gaining traction with affluent clients that are among the most devoted ETFs users. VOO’s rise is also confirmation of the validity of the ETF share class structure – something Vanguard pioneered and something other issuers are copying now that they can.
“Vanguard S&P 500 ETF’s prominence is timely as its parent mutual fund is set to turn 50,” adds Sotiroff. “The ETF is a share class of Vanguard 500 Index VFIAX, formerly Vanguard First Index Investment Trust, which Vanguard launched on Aug. 31, 1976. It is the first and oldest index-tracking mutual fund available to retail investors.”
‘VOO and Chill’ Helps
As the “kids” say on various investing subs on Reddit, just “VOO and chill.” It’s a colloquialism for not fiddling with speculative stocks and simply owning the market by way of an efficient, low-cost index fund – advice Warren Buffett once dispensed.
That is to say retail investors have very much played an important in VOO starting the $1 trillion ETF club and that will likely be the case with a few other ETFs that enter this ballyhooed territory in the future.
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