S&P 500

The S&P 500 is like a financial superhero, mirroring the performance of the 500 biggest players in the U.S. stock market.  Think of it as your ticket to the heart of American capitalism, all wrapped up in one tidy package.  It is a big group of 500 popular companies in the United States.  It includes all kinds of companies, like ones that make phones, sell clothes, or build houses.  

Warren Buffett, the greatest stock picker of all-time, has declared publicly that 90% of the money in his wife’s trust will be invested in a very low-cost S&P 500 index fund like the ones listed below:

Vanguard 500 Index Fund (VFIAX/VOO)

Managed by Vanguard, this index fund is one of the largest and most widely used options for investing in the S&P 500. VOO is the ETF version of this fund.

SPDR S&P 500 ETF (SPY)

Often referred to as the “SPY”, this ETF is one of the oldest and largest ETFs tracking the S&P 500 index. It is known for its high liquidity and low expense ratio.

iShares Core S&P 500 ETF (IVV)

Managed by BlackRock, IVV is another popular ETF that closely tracks the performance of the S&P 500 index.

Schwab S&P 500 Index Fund (SWPPX/SCHX)

Schwab offers both a mutual fund and ETF version of their S&P 500 index fund. They are known for their low expense ratios.

Fidelity 500 Index Fund (FXAIX/FUSEX)

Fidelity’s S&P 500 index fund is available as both a mutual fund and ETF. It is known for its low costs and solid performance.

Why invest in the S&P 500?

Here’s why investing in these S&P 500 index funds and ETFs are great for long-term investing:

Diversification

The S&P 500 has a bunch of different companies in it, so when you invest in it, you’re not just relying on one company to do well.  If one company struggles, others might do better and balance things out.

Makes Money Over Time

Over many years, the S&P 500 has made a good amount of money for people who invest in it.  It’s like a savings account that grows over time, but it’s with companies instead of banks.  Historically, the index has produced average annual returns of around 7-10% after adjusting for inflation, making it one of the most reliable long-term investment options.

Includes Big, Reliable Companies

The S&P 500 includes big, well-known companies known as “blue-chip” stocks that have been around for a long time and usually do pretty well.  These companies are like the superheroes of the stock market because they’re strong and dependable.

Doesn’t Cost Much

Investing in the S&P 500 usually doesn’t cost a lot of money.  It’s like buying a ticket to join a big group of companies without having to pay a lot of fees. There are numerous index funds and exchange-traded funds (ETFs) that track the performance of the index.

Easy to Join

You can invest in the S&P 500 without needing to do a lot of complicated stuff.  You can just buy something called an “index fund” that includes all the companies in the S&P 500, and then you’re part of the club!

Set it and Forget It

Timing the market is nearly impossible, and trying to do so often leads to missed opportunities or losses.  Emotional reactions to short-term market fluctuations typically leads to poor investment decisions, such as panic selling during market downturns or chasing performance during market rallies.  A “set it and forget it” approach helps investors avoid making impulsive decisions based on emotions and instead focus on their long-term goals.