Vanguard S&P 500 ETF: July 2026 update

• Vanguard is a pioneer in index investing and launched its first ETF in 2001

• This ETF provides exposure to the largest companies in the US

• It’s a low-cost way to track the S&P 500 index

How it fits in a portfolio

An ETF is a basket of investments that often includes company shares or bonds. They tend to track the performance of an index such as the S&P 500 and trade on stock exchanges, like shares. This means their price fluctuates throughout the day.

The Vanguard S&P 500 ETF offers a low-cost way to track the performance of the S&P 500 index. This index is widely regarded as the best measure of the performance of large US companies and features household names like Microsoft, Apple and Amazon.

An ETF is one of the simplest ways to invest and can be a low-cost starting point for an investment portfolio aiming to deliver long-term growth. This ETF could be used to diversify a long-term global portfolio, including those focused on other regions such as the UK, Europe or emerging markets, or one focused on smaller companies.

Manager

Vanguard is a pioneer when it comes to index investing, having created the first retail index fund in 1976. It now runs some of the largest index funds and ETFs in the world. Given its size, it has a big investment team with the expertise and resources to help its ETFs track indices and markets as closely as possible, while having scale to keep costs down.

Vanguard ETFs are run by a large, global team. They’re spread across three investment hubs around the world – the US, UK and Australia. This team-based approach means there’s no named manager on the ETF. Vanguard has run this ETF since 2012.

Vanguard also has a trading analytics team, which is responsible for ensuring the ETFs buy and sell investments efficiently and at a competitive cost. This involves analysing data from different brokers and banks. Lower costs should help the ETFs track their benchmarks as tightly as possible.

Process

This ETF aims to track the performance of the largest companies in the US, as measured by the S&P 500 index. It does this by investing in all 500 companies in the index, and in line with each company’s index weight. This is known as full replication and can help the ETF track the index closely.

The ETF invests a large amount in the technology sector, which accounted for 38.6% of its assets as at 31 May 2026. This was followed by financials, communication services and consumer discretionary, which made up 11.3%, 10.4% and 9.7% of the ETF respectively.

Reducing costs is a key part of keeping the difference in performance between the ETF and the benchmark to a minimum. In any tracker fund, factors like taxes, dealing commissions and spreads, and the cost of running the fund all drag on performance. To help keep these costs down, the team aims to make large investments in companies instead of lots of small transactions.

Vanguard will also lend some of the investments in the ETF to other providers in exchange for a fee, which can be used to offset some of the costs. It will only lend securities to a limited number of high-quality approved dealers. Vanguard indemnifies the fund against any loss from this process, meaning there should be no negative impact on investors. However, stock lending adds risk.

As this ETF is listed offshore investors are not usually entitled to compensation from the UK Financial Services Compensation Scheme.

Culture

Vanguard is one of the largest asset managers in the world and manages around $12trn of assets globally. The group aims to put the client at the forefront of everything it does, which drives its focus on quality, low-cost index products.

John Bogle founded Vanguard in 1975, and it’s owned by investors. This allows Vanguard to redirect its profits back to investors in the form of lower fees, instead of paying dividends to external shareholders. Bogle believed in creating products that simply track the performance of a market rather than taking a shot at picking individual companies which may beat them.

The team running this ETF works closely with other equity research and risk departments across the business. They have daily and weekly meetings to discuss ongoing strategy, providing support and challenge on how to run the ETF effectively.

ESG Integration

Vanguard is predominantly an index fund house. While it’s offered exclusions-based index funds for many years, it’s lagged peers in offering index funds that explicitly integrate Environmental, Social and Governance (ESG) criteria by tracking indices that tilt towards companies with positive ESG characteristics, and away from those that don’t.

Vanguard’s Investment Stewardship team carries out most of the firm’s voting and engagement activity. Its stewardship activity is grounded in the firm’s four principles of good governance: board composition and effectiveness, board oversight of strategy and risk, executive pay and shareholder rights.

The Investment Stewardship team produces frequent insights on their engagement activity at both a corporate and governmental level. Investors can also access fund-by-fund proxy voting records, although voting rationales are not provided. That said, voting and engagement case studies can be found in the firm’s annual Investment Stewardship report and quarterly Engagement and Voting reports.

Vanguard courted controversy in 2022 when it left the Net Zero Asset Managers’ Initiative, a group of asset managers that have committed to achieving net zero carbon emissions by 2050. It claimed its decision would improve clarity for investors and allow it to speak independently. We view this as a disappointing backward step. Furthermore, in 2024 and 2025, it was reported that Vanguard failed to support a single shareholder proposal requiring more action from investee companies on environmental and social matters.

The Vanguard S&P 500 ETF tracks an index that doesn’t specifically integrate ESG considerations into its process. The ETF can therefore invest in shares issued by companies in any sector in line with the benchmark.

Cost

The ETF currently has an ongoing annual fund charge of 0.07%.

The annual charge to hold ETFs in the HL Stocks & Shares ISA, SIPP or Fund & Share Account is 0.35% (capped at £150 p.a. in each account) and 0.25% in the HL Lifetime ISA (capped at £45 p.a.). There are no charges from HL to hold ETFs within the HL Junior ISA. As ETFs trade like shares, both a buy and sell instruction will be subject to the HL share dealing charges.

Performance

Since launch in May 2012, the ETF has tracked the S&P 500 index well. In the last 10 years, it’s gained 312.57%* versus 315.15% for the index. As expected from an ETF, it’s fallen behind the benchmark over the long term because of the costs involved in running the ETF. However, the tools used by the managers have helped keep performance close to the index. Remember, past performance isn’t a guide to the future.

Over the past 12 months, the ETF has tracked its benchmark tightly, returning 25.99%. Technology was the best performing sector and made the largest contribution to the ETF’s returns.

Despite positive returns, the US stock market has been volatile as investors continue to assess the long-term implications of artificial intelligence (AI), particularly for the largest technology companies. Semiconductor companies, like Micron and Advanced Micro Devices (AMD), have performed strongly over the past year, driven by increased demand for the chips that power AI.

But earlier this year investors became more cautious about how AI could disrupt some companies and potentially make them less relevant. Software companies saw sharp share price falls, due to concerns that AI could replace some of the products they develop and sell. Although the software sector has rebounded a little since the falls, it remains behind the wider US stock market so far in 2026.

Given Vanguard’s size, experience and expertise, we expect the ETF to continue to track the benchmark closely in the future, though there are no guarantees.

The S&P 500 is a product of S&P Dow Jones Indices LLC and has been licensed for use by Hargreaves Lansdown Asset Management.