(INVESTING IN A S&P 500 INDEX FUND COULD BE A SMART MOVE)
Friday, July 5, 2023
Hello everyone,
Warren Buffett is a big fan of S&P 500 Index Funds, so maybe you should consider squirreling away some of that hard-earned cash into one of those funds. As Buffett says, it’s a way for investors to mitigate the risks that come with choosing individual stocks.
By investing in this product, you are essentially buying all the big companies through the S&P500. If you do it consistently and average in, you will end up with a very good investment.
The S&P500 is a market index that tracks the stock performance of around 500 large-company U.S. stocks, including Amazon, Google parent company Alphabet, Meta, and Visa.
While the index is not immune to overall market downturns, long-term investors have historically earned a nearly 10% average annual return. However, as with all investments, it is important to note that past performance can’t be used to predict future results.
Here’s how much you’d have now if you’d invested $1000 in the S&P500 about one, five, and 10 years ago:
$1000 a year ago would be worth $942 as of April 20.
$1000 five years ago would be worth $1,689 as of April 20.
$1000 10 years ago would have more than tripled to $3,217 as of April 20.
Choosing to buy an S&P 500 index mutual fund or exchange traded fund (ETF) gives you exposure to the index’s underlying stocks.
It’s less risky than owing individual shares. Not as many severe drawdowns.
As index funds are considered passive strategies, they tend to be low-cost investments. Index funds track a benchmark performance and therefore don’t employ a manager to run the fund, as is the case with “active” strategies.
As a result, the average passive fund charges an annual fee of 0.12%, compared with a 0.60% average fee among active funds, according to data from Morningstar.
Of course, the sooner you start investing the better. The power of compounding will work for you and reward you handsomely.
Wishing you all a wonderful weekend.
Stay healthy and take care.
Cheers,
Jacque
