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

2 hours ago 1

Trevor Jennewine, The Motley Fool

Mon, May 4, 2026 astatine 4:08 AM CDT 5 min read

In April, State Street updated its semipermanent plus people forecasts. The S&P 500 (SNPINDEX: ^GSPC) is projected to instrumentality 7.1% annually during the adjacent 3 to 5 years, portion the S&P Small Cap 600 and MSCI Emerging Markets indexes are projected to instrumentality 7.6% and 7.5% annually, respectively.

Investors tin get vulnerability to those indexes by purchasing shares of the Vanguard S&P Small-Cap 600 ETF (NYSEMKT: VIOO) and the iShares MSCI Emerging Markets ETF (NYSEMKT: EEM). Here are the important details.

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Vanguard S&P Small-Cap 600 ETF

The Vanguard S&P Small-Cap 600 ETF tracks 600 U.S. companies that conscionable the explanation of small-cap stock, which presently includes equities with marketplace values ranging from $1.2 cardinal to $8 billion. The scale money owns stocks from each 11 marketplace sectors, but its assets are concentrated successful fiscal (18%), concern (17%), user discretionary (13%), and exertion (12%) stocks.

The 5 largest positions successful the Vanguard S&P Small-Cap 600 ETF are arsenic follows.

Eastman Chemical: 0.5%
Element Solutions: 0.5%
Primoris Services: 0.5%
Viavi Solutions: 0.5%
Argan: 0.4%

The Vanguard S&P Small-Cap 600 ETF returned 180% (10.8% annually) successful the past decade, portion the S&P 500 posted a full instrumentality of 315% (15.2% annually). One crushed small-cap stocks underperformed during that play was precocious involvement rates, which typically person a disproportionate interaction connected tiny businesses due to the fact that they trust much heavy connected floating-rate debt.

The Vanguard S&P Small-Cap 600 ETF has a tenable disbursal ratio of 0.07%, meaning shareholders volition wage $7 annually implicit each $10,000 invested. While that is good beneath the mean for U.S. scale funds, it is inactive much costly than the 0.03% disbursal ratio of the Vanguard S&P 500 ETF.

iShares MSCI Emerging Markets ETF

The iShares MSCI Emerging Markets ETF tracks astir 1,225 companies crossed emerging marketplace economies. It's astir heavy exposed to China, Taiwan, South Korea, and India, but besides includes stocks from Brazil, South Africa, and Saudi Arabia. The money has a ample percent of its assets invested successful 3 sectors: exertion (32%), financials (21%), and user discretionary (10%).

The 5 largest positions successful the iShares MSCI Emerging Markets ETF are arsenic follows.