Is “VOO And Chill” Actually A Good Way to Invest?

The Vanguard S&P 500 ETF (VOO) is the largest ETF on the U.S. market, with just over $1 trillion in assets under management. It got there because of several compounding factors: the strong performance of its underlying benchmark, the S&P 500 index, Vanguard’s brand reputation and economies of scale, an ultra-low 0.03% expense ratio, and, frankly, some catchy investing slogans.

One of the most popular is “VOO and chill.” The idea is simple. Put your money into a low-cost S&P 500 index fund like VOO, stop tinkering, and let time do the work. Like a lot of things you see on social media, it sounds good in theory.  In practice, though, your mileage may vary.

I want to be clear upfront. As shallow and elementary as “VOO and chill” can sound, I think it will probably beat the majority of stock pickers, options traders, market timers, leveraged ETF gamblers, and thematic ETF chasers over the long run. But if we’re going to take the strategy seriously, it’s worth looking at both the pros and cons.

The Case for VOO and Chill

The strongest argument for VOO is that it is low cost, tax efficient, diversified, and historically very hard to beat. The 0.03% expense ratio means a $10,000 investment costs just $3 a year in fee drag. Knowing Vanguard, I would not be surprised if that gets cut even further someday.

Tax efficiency is also excellent. VOO’s roughly 1% 30-day SEC yield will not turn heads, but most of its dividends are qualified, which can make them more tax efficient than ordinary income. As an ETF, VOO also benefits from the in-kind creation and redemption mechanism, which greatly reduces the likelihood of taxable capital gains distributions.

Performance has also been strong. Over the trailing 10-year period, VOO has delivered a 15.6% annualized return. The caveat is starting valuation. As of May 31, 2026, Vanguard reported that the portfolio traded at 28.1 times earnings and 5.5 times book value. Quality remains excellent though, with a 29.4% return on equity and a 23.8% earnings growth rate.

If we extend the backtest using Vanguard’s older S&P 500 mutual fund, we can go much further back. According to Testfolio.io data spanning 49.79 years from Aug. 31, 1976, through June 16, 2026, a $10,000 investment in VFINX with distributions reinvested before taxes would have compounded at 10.73% annualized. That original $10,000 investment would have grown to over $1.6 million.

Why You Might Not Want Only VOO

I’m not even going to spend much time criticizing VOO’s valuation or top-heavy concentration. That is simply a consequence of market-cap weighting. The largest winners become bigger parts of the index, and investors benefit from that momentum effect. You do not get to have your cake and eat it too. If you want market-cap-weighted indexing, this is unavoidable.

My bigger concern is volatility. Over that same backtest, an investor in VFINX would have experienced a maximum drawdown of 55.26% during the 2008 financial crisis. Imagine having a six-figure portfolio and watching more than half of it disappear. That is more than a years’ salary for many households. I do not know many investors who can genuinely “chill” through that kind of decline.

That is what you get when you’re 100% in equities. Annualized volatility over the full period was 17.54%, meaning the portfolio experienced wide swings from year to year. For investors with long time horizons and strong stomachs, that may be acceptable. For retirees or anyone nearing retirement, it may be too much.

The other issue is the so-called lost decade. From 1999 through 2008, VFINX returned just 3.56% annualized according to Testfolio.io. Over the same period, the total U.S. bond market, represented by VBMFX, compounded at 5.52% annualized. International stocks, represented by VGTSX, did even better at 8.77%.

U.S. equities have dominated the last decade, but that will not necessarily continue forever. There have been long stretches where U.S. stocks lagged other asset classes or delivered disappointing real returns after inflation. If your entire portfolio is VOO, you are making a concentrated bet on large-cap U.S. stocks continuing to outperform.

Should You VOO and Chill?

Personally, I do not do it. I prefer holding international stocks alongside U.S. equities, and I think bonds still have a role depending on age, risk tolerance, tax situation, and spending needs. The historical record is very clear that U.S. stocks do not outperform every year, every decade, or every market cycle.

That said, if the alternative is stock picking, chasing hot themes, day trading options, buying leveraged ETFs, crypto, or constantly rotating into whatever is working right now, then VOO and chill is probably the better strategy. It is simple enough that investors can actually stick with it. And in investing, sticking with a good plan often matters more than finding the perfect one.

The hard part is the “chill” part. Buying VOO is easy. Holding it through a 55% drawdown, a multi-year bear market, or a decade of mediocre returns is much harder. Investors who can genuinely do that will likely be rewarded over the long run. Investors who panic and sell during the next crisis probably will not.

So while VOO and chill may sound like a social media slogan, there is a reason it became popular. It is low cost, tax efficient, diversified, and backed by one of the strongest long-term records in investing. It may not be optimal for every investor, but as simple investing strategies go, it still ranks near the top.