Recent market trends indicate a potential for robust performance in the stock market, fueled in large part by advancements in artificial intelligence (AI). The S&P 500, recognized as America’s foremost stock market index, consists of 500 diverse companies spanning 11 economic sectors, including leading firms in the AI space, financial institutions, and various other industries.
Historically, the S&P 500 has provided an average annual return of 10.6% since its inception in 1957, but it has witnessed a remarkable spike of 17.8% in 2025, largely attributed to the impressive growth driven by the burgeoning AI sector. As the index navigates a more volatile landscape in 2026, it remains approximately 2% away from its recent all-time high.
Investors looking to capitalize on the S&P 500’s performance often turn to the Vanguard S&P 500 ETF, an exchange-traded fund designed to replicate the index’s performance by holding the same stocks with similar weightings. Despite the inherent challenges in timing market movements, many are questioning whether now is an opportune moment to invest in this ETF.
The S&P 500’s structure is weighted by market capitalization, which means larger companies significantly influence the index’s performance. The information technology sector alone commands an impressive 34.4% of the index’s total value, housing some of the world’s largest firms such as Nvidia, Apple, Microsoft, and Broadcom, together valued at $12.7 trillion.
Other notable sectors within the S&P 500 include:
- Financials (13.4%): Featuring major players like Berkshire Hathaway, JPMorgan Chase, and Goldman Sachs.
- Communication Services (10.6%): Home to giants such as Alphabet, Meta Platforms, and Netflix.
- Consumer Discretionary (10.4%): Includes companies like Amazon, Tesla, and Home Depot.
- Healthcare (9.6%): Comprising firms such as Eli Lilly, Johnson & Johnson, and AbbVie.
- Industrials (8.2%): Featuring major corporations like Caterpillar, Boeing, and Deere & Company.
While AI stocks are currently among the most valuable, leading firms in this sector, including Alphabet and Amazon, exist outside the information technology category. Nevertheless, the tech sector remains crucial due to its concentration of AI innovators. Since the start of the AI boom in 2023, the S&P 500 has achieved a 78% return, contrasted with a significant decrease to 56% when excluding the tech sector.
Historically, stock market investments have proven resilient, with volatility being a standard aspect of market dynamics. Investors who maintain a long-term strategy often realize the best outcomes, as evidenced by the S&P 500’s compound annual return of 10.6% over decades of market fluctuations.
Data from Capital Group highlights that the S&P 500 typically experiences a 5% decline at least once each year, with 10% corrections occurring approximately every two and a half years. Even less common bear markets—defined as downturns of at least 20%—arise roughly every six years. Intriguingly, investors who capitalized on dips over the last 70 years have typically reaped substantial rewards, while those who invested during past record highs often saw positive returns, despite enduring corrections.
For investors eyeing the Vanguard S&P 500 ETF, the fund is recognized for its affordability, boasting an expense ratio of just 0.03%, meaning a $10,000 investment incurs only a $3 annual fee. Consequently, for those prepared to adopt a long-term investment perspective—ideally spanning five years or more—now may be an advantageous time to enter the market.
