What is the S&P 500?
The S&P 500 is a stock market index that tracks the 500 largest publicly traded companies in the United States. It includes giants like Apple, Microsoft, Amazon, Google and Tesla.
Why index funds instead of individual stocks?
Picking consistently winning individual stocks is nearly impossible; Even professional fund managers fail to outperform the S&P 500 over the long term. Index funds offer immediate diversification across 500 companies with a single purchase.
Historical performance
The S&P 500 has delivered an average annual return of approximately 10.5% over the past 50 years (about 7.5% after inflation). This includes declines like those in 2008 and 2020; the market always recovered.
Best S&P 500 Index Funds
- Vanguard VOO — 0.03% expense ratio
- Fidelity FXAIX — 0.015% expense ratio
- SPDR SPY — 0.015% expense ratio 0.09%
How to get started
Open a brokerage account, set up automatic monthly contributions, and buy the S&P 500 fund that your broker offers with the lowest expense ratio. Then leave it like that for decades.
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