Welcome to the big leagues!
So you read my Bulletin on Index Funds and Chilling and you’re ready to chill, huh? Excellent news!
Now, I’m sure you’re asking the next logical question: where the heck do I start? I’d recommend starting with one of the index funds that track the S&P 500— which is a list that is made up of different companies with a value of more than $10 billion.
Generally speaking, few investors — even the most renowned fund managers — beat the market. And the ones who do put an awful lot more time into their investments than I do or would even like to (if I did, I wouldn’t be able to write these articles!). So after my own cost-benefit analysis (cost being the time I spend managing my investments compared to the benefit of money I get from them), index funds are my go-to investments. They also happen to be the recommended investment of an investor you may have heard of: Warren Buffett.
My rationale behind starting your investing journey with funds that track the S&P 500 is that the returns are pretty reliable. Sure, nothing is guaranteed on Wall Street, but because these funds are composed of slices of the biggest companies in the U.S., the only way you’d lose everything would be if the entire stock market disappeared into a plume of smoke. I’ve seen some crazy things, but nothing that crazy.
Three popular index funds that track the S&P 500 are VOO, IVV and SPY. Now, to be totally honest: because all three funds track the S&P 500, they are going to be very similar. Here’s a look at their performance over the last five years.
VOO
IVV
SPY
My two cents?
In future articles, I’ll be talking about expense ratios, which is a factor you can use to help you decide between similar investment vehicles. But for now, I’ll leave you with this: because these three funds really and truly are so similar, it’s pretty safe to say you won’t have dramatically different success choosing one over the other. So, go forth and Index Funds and Chill!
xo,
