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Why is Reddit Obsessed with VOO?

Why is Reddit Obsessed with VOO?

Netizen Nina

Why VOO is popular on Reddit & the hidden tax costs for Malaysians.

Investing

Key Takeaways

1

ETFs are like a 'Lego box' of stocks, offering instant diversification and low costs.

2

VOO tracks the US S&P 500 (Top 500 companies), historically returning ~10% annually.

3

Malaysians face a 30% US withholding tax on VOO dividends.

Why is Reddit Obsessed with VOO? A Guide to ETFs for Malaysians

If you have spent even five minutes on finance subreddits like r/MalaysianPF, you have probably seen the acronyms ETF and VOO thrown around as the ultimate solution to building wealth. For a beginner, this can feel like a secret language. However, an Exchange-Traded Fund (ETF) is actually one of the simplest and most powerful tools for anyone who wants to invest without the stress of picking individual stocks.

What Exactly is an ETF?

Think of an ETF as a pre-packed "Lego box" of stocks. Instead of buying a single share of one company, you buy a single share of the ETF, which holds a basket of hundreds or even thousands of different companies.

As explained by InvestSmart SC, ETFs are traded on a stock exchange just like regular shares. This means you can buy and sell them throughout the day at market prices. They are much cheaper than traditional unit trusts because they are "passively managed," meaning they simply follow a specific index rather than paying a fund manager to try and beat the market.

The VOO Obsession: Tracking the "Top 500"

The reason people on Reddit constantly talk about VOO (Vanguard S&P 500 ETF) is that it tracks the 500 largest publicly traded companies in the United States. When you buy VOO, you are betting on the long-term growth of global giants like Apple, Microsoft, Amazon, and Tesla.

Historically, the S&P 500 has delivered an average annual return of around 10% over the last several decades. For many investors, "buying the whole market" through VOO is much safer than trying to guess which individual company will be the next big winner.

The Malaysian Reality: Taxes and Traps

While VOO is a great product, investing in US-domiciled ETFs from Malaysia comes with two major "hidden" costs that Reddit often forgets to mention:

  • 30% Withholding Tax: The US government takes 30% of all dividends paid to you as a non-resident. This means if VOO pays a dividend of RM100, you only receive RM70.
  • US Estate Tax: If your US-based assets exceed $60,000, your next of kin could be hit with a US estate tax of up to 40% if you pass away.

Investing for the Long Run

ETFs are the bridge between doing nothing and being a professional trader. They allow you to diversify instantly and keep your costs low, which is the most reliable way to build wealth over decades. By "buying the world" through a single fund, you protect yourself from the failure of any single company while riding the wave of global economic growth.

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