Warren Buffett Says Buy This S&P 500 Index Fund. It Could Soar by 139%, According to a Top Wall Street Analyst | The Motley Fool

Warren Buffett is one of the world’s top investors. In 1965, he acquired a controlling stake in a struggling textiles enterprise called Berkshire Hathaway (BRK.A 0.53%) (BRK.B 0.59%), and converted it into a holding company which is now worth over $1 trillion. Berkshire owns a number of subsidiaries like GEICO Insurance and Dairy Queen, in addition to a $288 billion portfolio of publicly traded stocks and securities which Buffett and his team oversee.

Had you invested just $500 in Berkshire stock in 1965, it would have grown to a whopping $22.3 million at the end of 2024, thanks to Buffett’s incredible ability to pick stocks. But he is a full-time professional with decades of experience, so he knows the average investor would struggle to replicate his results. That’s why he often recommends they buy an exchange-traded fund (ETF) that tracks the performance of a diversified index like the S&P 500 (^GSPC 0.54%).

The Vanguard S&P 500 ETF (VOO 0.65%) is one Buffett has recommended by name in the past, and it’s popular for its extremely low cost. According to Wall Street analyst Tom Lee from Fundstrat Global Advisors, the S&P 500 could soar by 139% by 2030, so investors who buy the Vanguard ETF today could earn a very nice return over the next five years.

The most diversified major U.S. stock market index

The U.S. is home to several stock market indexes, but these three receive the lion’s share of the attention: The Dow Jones Industrial Average (DJINDICES: ^DJI), the Nasdaq Composite (NASDAQINDEX: ^IXIC), and the S&P 500. The Dow is made up of just 30 stocks, and the Nasdaq is very technology-heavy, so the S&P 500 tends to be the benchmark for most investors.

The S&P 500 hosts 500 companies from 11 different sectors of the economy. So it’s highly diversified, but it still offers ample exposure to the high-growth segments of the market. Information technology is the largest sector in the index, with a weighting of 33.4%, and it’s home to the world’s three largest companies: Nvidia, Microsoft, and Apple, which have a combined value of $10.9 trillion.

Below is a list of each S&P 500 sector, its weighting, and a few of its most noteworthy stocks.

Data source: State Street. Sector weightings are accurate as of July 10, 2025, and are subject to change.

Getting into the S&P 500 isn’t easy. Companies must have a market capitalization of at least $22.7 billion, and the sum of their earnings (profits) must be positive over the most recent four quarters. A special committee meets once per quarter to decide which companies make the cut, giving investors confidence that only the highest-quality names make it into the index.

The Vanguard S&P 500 ETF is one of the cheapest ways to invest in the index. With an expense ratio of 0.03%, an investment of $10,000 would incur an annual fee of just $3. Vanguard says that competing funds across the industry charge an average expense ratio of 0.75%, an eye-popping 25 times higher. This can dent investors’ returns over the long run.

Tom Lee predicts 139% upside by 2030

No Wall Street analyst is right all the time, so investors should take every forecast with a grain of salt. But Lee has made a string of extremely accurate predictions over the last couple of years, so it’s always worth taking his viewpoint into consideration.

Lee predicted that the S&P 500 would climb to 4,750 in 2023, while many other analysts were still cautious because of the bear market the year before. The index wound up closing the year at 4,769, almost exactly as he forecasted. Lee then issued five predictions for the S&P 500 throughout 2024, telling investors it could hit 5,200, 5,500, 5,700, 6,000, and 6,300. The index hit the first four of those targets, only just falling shy of the last one.

Then, after the Trump administration’s tariff-induced 19% collapse in the S&P 500 in April this year, Lee was one of the only analysts on Wall Street predicting a V-shaped recovery (a rapid rebound back to new highs). The index proceeded to set a new record high in June.

But Lee isn’t just focused on the near term. Last year, he forecasted that the S&P 500 will hit 15,000 by 2030, which implies a return of 139% from where it’s trading as of this writing (July 14). That’s the return investors can expect from the Vanguard S&P 500 ETF over the next five years if he’s right.

Lee believes artificial intelligence (AI) will play a major role in that upside, as companies could invest trillions of dollars in automation to offset labor shortages. He also thinks the S&P 500 will benefit from a demographic shift as millennials and Gen Zers enter their highest-earning years (between ages 30 and 50), which is when they make important life decisions like investing.

The S&P 500 has always climbed to new highs since it was established in 1957, despite experiencing several corrections and bear markets along the way, so reaching 15,000 seems inevitable. Even if it doesn’t happen by 2030, it’s likely to happen at some point in the future, so following Buffett’s advice by buying the Vanguard S&P 500 ETF is probably a smart decision.