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This investment is in my long-term portfolio

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Important points

  • Choosing the right investments is key to building wealth in the stock market.

  • S&P 500 ETFs can be a fantastic option.
    There are a few things to consider before making an investment decision.

Investing in the stock market is one of the easiest and most effective ways to build wealth, but making the right investments is crucial. However, this can be a challenge when the options seem endless.

Everyone has different preferences, so there is no one-size-fits-all solution when it comes to deciding where to invest your money. However, there is one investment that I would like to keep in my portfolio for as long as possible: Vanguard S&P 500 ETF (New York Stock Exchange: A1JX53 1.10%).

What is an S&P 500 ETF?

An ETF, or exchange-traded fund, is a collection of stocks bundled into a single investment. Some ETFs contain stocks from a specific industry, while others are broader and include a wider variety of companies.

So an S&P 500 ETF is an investment designed to track the S&P 500 index itself. That means it contains the same stocks as the index, which is about 500 stocks from the biggest and strongest companies in the US.

One of the reasons I invest heavily in the Vanguard S&P 500 ETF is that it is more likely to bounce back from recessions. The S&P 500 itself has a history of recovering from corrections and declines, and while there are never any guarantees when it comes to investing, there is a good chance that it will recover from future downturns as well.

In addition, this type of investment is very easy to maintain. The fund includes hundreds of strong stocks in a variety of industries, so I don’t have to worry about choosing individual stocks, researching companies, or deciding if it’s time to sell. All I have to do is invest a little each month and let the fund do the rest of the work.

Is this investment right for you?

An S&P 500 ETF is a good option for anyone who wants to take ownership of their investments. If you prefer to avoid the extensive research involved in buying individual stocks, this is a much easier option.

It’s also possible to make a lot of money over time with S&P 500 ETFs. The index itself has historically produced an average return of around 10% per year, so its annual highs and lows have averaged around 10% per year over the years. over time. Yep. For example, if you invest $300 a month and earn an average annual return of 10%, after 30 years you will have almost $600,000.

A disadvantage of this type of investment is that it cannot generate above-average returns. Because an S&P 500 ETF is designed to follow the market as it moves, it’s impossible to beat the market. For many investors, the simplicity of investing in an S&P 500 ETF outweighs the lower returns. But if your primary goal is to beat the market, this may not be the right investment for you.

Also, you don’t have as much control over your investments as you would if you bought individual stocks. You cannot choose the shares within the fund. While that’s not a barrier for many investors, it can be a downside if there are certain companies you’d rather not invest in.

The Vanguard S&P 500 ETF may be a fantastic investment for many people, but it’s not for everyone. By considering your preferences and your ideal investment approach, you can more easily decide if it belongs in your portfolio.

The article This investment is in my long-term portfolio first appeared in The Motley Fool Germany.

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This article represents the author’s opinion, which may differ from the “official” recommendation position of a premium Motley Fool advisory service. Questioning an investment thesis, including our own, helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

This article was written by Katie Brockman and was published on Fool.com on 03/20/2022. It has been translated so that our German readers can join the discussion.

The Motley Fool owns stock and recommends the Vanguard S&P 500 ETF.

Motley Fool Germany 2022

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