Even when you focus on the long term and use a buy-and-invest strategy, your portfolio should occasionally change over time. Not all investments will fit your goals as your life, risk tolerance, and opportunities change, and that’s perfectly okay.
No matter what, though, there’s one investment I’ll always keep in my portfolio — and it’s one I think you should hold on to, too.
It has stood the test of time
the one thing you can count on a S&P 500 Index fund is consistency. By no means does past performance guarantee anything about future performance, but over the decades, the S&P 500 has shown it has the power to rebound from some of the worst economic conditions the US has seen. The S&P 500 as we know it now was created in 1957, and since then, it has gone through many crashes and crises, including Black Monday (1987), the bust of the dot-com bubble (2001). great Recession (2008–2009), and the COVID-19 pandemic (2020–present).
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When you are investing for the long term, you want investments that can survive tough economic periods and recover after them, as you will inevitably go through such times. If an investment grows rapidly for a while, but then falls over a short period of time and never recovers, those growth years would make no sense. It’s not something you need to worry about with an S&P 500 index fund.
it produces the result
Historically, the S&P 500 has delivered an average annual return of more than 10%. At that rate, consistent investing can provide large returns over time. If those average annual returns continue over the next 30 years, here’s how much you’ll benefit based on a few different monthly contribution levels:
|monthly contribution||Total individual contribution over 30 years||Net asset value after 30 years|
You can live with a 10% annualized return as an investor — especially considering how successful the S&P 500 is compared to other funds. The S&P 500 is the most common benchmark for fund managers dealing with large-cap stocks, and it is extremely difficult to outperform. Just last year, the S&P 500 lost nearly 80%. performed better than actively managed funds, Returns will obviously vary from year to year, but if your investments are growing on average about 10% annually over the long term, you’re in good shape.
It makes investing easy
A solid portfolio well diversified among industries. With an S&P 500 index fund, you know you’re getting a range of well-established companies in nearly every sector: communications services, consumer discretionary, consumer staples, energy, financial, healthcare, industry, information technology, Materials, Real Estate, and Utilities. And that’s just the broad area. You also have industries within these areas such as automotive within consumer discretion, insurance within financial insurance, and software within information technology.
An S&P 500 fund gives you instant diversification while meeting one of the key fundamentals of investing. Trying to achieve that level of diversification by investing in different companies will not only be exhausting – imagine all the companies and industries you would need to research – but there is also a good chance that the resulting portfolio will last longer. will weaken the index. ,
If I need an investment in my portfolio for the long term, this is one that checks the box for key investment fundamentals, can survive tough economic times, and provides returns that will help me move toward my financial goals. Keeps it on track. An S&P 500 index fund accomplishes all of those things.
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