Buy 2 Vanguard Index Funds to Beat the S&P 500 in the Next 5 Years, According to Wall Street Analysts

Core Viewpoint - State Street Investment Management forecasts that the S&P 500 will return 39% over the next five years, while the S&P Mid-Cap 400 and S&P Small-Cap 600 are expected to return 41% and 42%, respectively [1]. Group 1: Vanguard S&P Mid-Cap 400 ETF - The Vanguard S&P Mid-Cap 400 ETF tracks 400 mid-cap stocks with market values between $8 billion and $22.7 billion, heavily weighted in industrials (24%), financials (15%), and technology (14%) [3]. - Over the last 15 years, the Vanguard S&P Mid-Cap 400 ETF returned 365% (10.8% annually), underperforming the S&P 500, which returned 591% (13.7% annually) [3]. - The fund has an expense ratio of 0.07%, costing shareholders $7 per year on every $10,000 invested [4]. Group 2: Vanguard S&P Small-Cap 600 ETF - The Vanguard S&P Small-Cap 600 ETF tracks 600 small-cap stocks with market values between $1.2 billion and $8 billion, primarily focused on financials (18%), industrials (18%), and consumer discretionary (13%) [5]. - The Vanguard S&P Small-Cap 600 ETF returned 360% (10.7% annually) over the last 15 years, underperforming the S&P 500 by 231 percentage points but outperforming the Russell 2000 by 60 percentage points [7]. - This fund also has an expense ratio of 0.07% [7]. Group 3: Performance Outlook - The S&P 500 is expected to outperform small-cap and mid-cap index funds due to the inherent drawback of these funds selling high-performing stocks as they exceed market value thresholds while retaining underperforming stocks [8][9]. - The S&P 500 consists of stocks that have already proven successful and is reconstituted quarterly, ensuring it tracks the most significant U.S. stocks [9].