If anyone is having the notions of investing in the stock market, the most convenient way of doing that would be through the S&P 500 index fund. S&P 500 holds the top 500 American companies and can track how the index is performing. The reason that buying the shares of SPDR S&P 500 ETF (NYSEARCA:SPY) is a safe bet is because it directly relays you to the biggest U.S stock.
The companies that make up SPDR S&P 500 ETF (NYSEARCA:SPY) are among the most powerful companies of the U.S stock market and make 80 percent of the U.S stock market on the basis of market capitalization. So we can say that S&P 500 is like a junction where all big U.S companies with large capital meet. The investor can be looking at 5.14 trillion dollars, benchmarked to the index, along with assets up to 1.6 trillion dollars. 423 out of the 500 companies are dividend paying so the shareholder can expect heavy payout in dividends.
The benefit that comes with SPDR S&P 500 ETF (NYSEARCA:SPY) is that it is an exchange traded fund hence you can buy as little as a single share. Mutual funds are hard to procure for some, such as Vanguard 500 index needs minimum initial investment of 3,000 dollars. SPDR S&P 500 ETF (NYSEARCA:SPY) is inexpensive, that is to say, the annual fee is of the stock is 0.09 dollars. In contrast, 10,000 dollar investment would cost you about 9 dollars per year. Who wouldn’t want to invest in a fund that is such a safe bet?
One good thing about investing in S&P 500 is that it usually beats all the large cap mutual funds. And this has become a precedent. Most often than not, S&P 500 outperforms the large cap mutual funds by as high as 87 percent. If our word doesn’t count for much, you’d be happy to know that Warren Buffet is a fan of trust funds and prefers them over mutual funds. In fact he made it very clear that an average investor should put 10 percent in government bonds and 90 percent of his money in the S&P 500. Trust fund comes with long term results whereas mutual funds don’t offer that sort of sustainability.
So now you’ve heard it from the man himself. If you’re thinking that investing in the inexpensive trust fund would not beget you anything, you’re definitely wrong. S&P 500 has always taken care of its shareholders; as for the large cap mutual funds, there is no telling when they’ll plummet. Besides it is obvious S&P 500 outperforms the large-cap mutual funds just about every time. An investor who is looking to invest in the large-cap mutual funds must be looking for a short cut to make money but that’ll also tell you that he’s a rookie. As for those who invest in the trust funds, they are in it for the long haul and are patient enough to watch the stock rise quarter by quarter and then get a healthy return at the end.