1 Vanguard Index Fund to buy before it rises 172%, according to a Wall Street analyst

Tom Lee, managing partner and head of research at Fundstrat Global Advisors, was one of the only analysts to predict the stock market to rise in 2023. S&P 500 (SNPINDEX: ^GSPC) is down 19% in 2022 due to runaway inflation and rapidly rising interest rates, but Lee analyzed that weakness and predicted a 24% gain next year.

Lo and behold, the S&P 500 advanced 24% in 2023 on artificial intelligence (AI) enthusiasm and signs of economic resilience. In addition, Lee predicted in 2017 that Bitcoin would grow more than 20 times to reach $55,000 by 2022. This prediction came true faster than expected. Bitcoin hit $67,000 in 2021.

Of course, a few good guesses don’t mean Lee is omniscient, but they lend credence to his latest (and perhaps boldest) prediction. He recently told Bloomberg that the S&P 500 could reach 15,000 by 2030 as demand for artificial intelligence increases and the millennial population enters its peak earning years.

The S&P 500 is currently trading at 5,515, meaning Lee expects the index to advance 172% by the end of the decade, implying an annualized return of 16%. Investors can position themselves to benefit from Lee’s prediction by holding an S&P 500 index fund such as Vanguard S&P 500 ETF (NYSEMKT:VOO).

The Vanguard S&P 500 ETF can help investors harness artificial intelligence

Tom Lee identified two catalysts that could catapult the S&P 500 to 15,000 by 2030. First, the millennial population is larger than any other generation alive, and millennials are entering their prime years, which should boost economic growth. Second, the global labor shortage is projected to reach 80 million workers by 2030, which should create demand for artificial intelligence (AI) as a means of automating workflows.

The Vanguard S&P 500 ETF can help investors capitalize on both trends. The index fund spreads money across value stocks and growth stocks covering about 80% of US stocks and 50% of global stocks by market value. In other words, it provides exposure to hundreds of companies that play a crucial role in fueling the US and global economies.

Additionally, hundreds of S&P 500 companies are experimenting with AI. In fact, a record 199 index companies mentioned AI during their first-quarter earnings calls, according to FactSet Research. Additionally, the S&P 500 is skewed toward the information technology sector, and companies in this sector should be among the biggest beneficiaries of the AI ​​boom.

The top 10 holdings in the Vanguard S&P 500 ETF are listed below by weight.

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1. Apple: 6.9%

2. Microsoft: 6.8%

3. Nvidia: 6.2%

4. Alphabet: 4.1%

5. Amazon: 3.7%

6. Meta platforms: 2.2%

7. Berkshire Hathaway: 1.7%

8. Broadcom: 1.5%

9. Tesla: 1.4%

10. Eli Lilly: 1.4%

Importantly, the Vanguard S&P 500 ETF has a relatively cheap expense ratio of 0.03%. That means annual fees will total $0.30 for every $1,000 invested in the index fund.

The S&P 500 has been a safe money maker over long periods

The S&P 500 was created in 1957, but the selection criteria can be applied to earlier time periods to produce back-tested hypothetical data. Using this methodology, Crestmont Research publishes an annual report detailing the rolling returns of the S&P 500 since 1900. The index would have been a profitable investment at each 20-year interval during the period.

Moreover, the S&P 500 has advanced 634% over the past 20 years, reaching 10.5% annually. Very few asset classes generated better returns over that period. The S&P 500 outperformed international stocks, fixed income, real estate and precious metals, according to data from Morgan Stanley.

As a caveat, the S&P 500 currently trades at 21 times forward earnings, a premium to the five-year average of 19.4 times forward earnings and the 10-year average of 17.9 times forward earnings. That means many stocks are historically expensive. Additionally, while the S&P 500 could hit 15,000 by 2030, the odds are remote. Tom Lee’s forecast assumes a 16% annual return, well above the historical average.

However, the S&P 500 provides exposure to hundreds of the world’s most influential companies, and owning an index fund like the Vanguard S&P 500 ETF can help investors capitalize on the aging millennial population and the artificial intelligence boom. That makes a compelling investment case.

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

1 Vanguard Index Fund to Buy Before It Rises 172%, According to a Wall Street Analyst was originally published by The Motley Fool