Key Points
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It’s important to maintain a diverse investment portfolio.
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Investing in the S&P 500 index is a good way to do that.
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If you’re not sure which S&P 500 fund to buy, you may want to favor the lowest expense ratio.
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Investing your money is a great way to make it work for you. But there are certain basic rules of investing it pays to follow.
First, you should never invest money you expect to need a few years down the line. People who use the stock market to make a quick buck tend to be unsuccessful and often lose money rather than gain it. To succeed as an investor, plan to hold onto your assets for many years so their value can appreciate over time.
Secondly, understand what you’re buying. If you don’t understand how crypto works, for example, steer clear of it.
Finally, make sure to maintain a diversified portfolio. This can help your money grow, all the while protecting you during market downturns or periods of volatility.
One easy way to diversify within your portfolio is to load up on S&P 500 ETFs. And this Reddit poster wants to know which one is best.
What is an S&P 500 ETF?
ETFs, or exchange-traded funds, are funds that trade publicly and hold a collection of assets. S&P 500 ETFs are ETFs that aim to match the performance of the S&P 500 index, which consists of the 500 largest publicly traded companies by market capitalization.
There are a couple of benefits to investing in the S&P 500. First, you’re getting instant diversification, since you’re effectively putting your money into 500 different businesses. Also, you’re investing in established companies, which might give you some peace of mind.
Which S&P 500 ETF should you choose?
In the post above, the question is which S&P 500 ETF to invest in. The choices that are being asked about are:
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IVV – the iShares Core S&P 500 ETF
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VOO – the Vanguard S&P 500 ETF
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SPY – the SPDR S&P 500 ETF Trust
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FXAIX – the Fidelity 500 Index
The reality is that you’re probably looking at similar returns out of all of these, because they all do the same thing — track and try to match the performance of the S&P 500. So what you may want to do to make a decision is look at the fees involved.
VOO, for example, has an expense ratio of 0.03%, as does IVV. SPY’s expense ratio is 0.09%, while FXAIX is 0.02%. However, it’s worth noting that FXAIX is an index fund, not an ETF.
ETFs and index funds are similar but trade a little differently and are priced a little differently. If you’d rather stick with an ETF, you may want to turn to VOO or IVV.
Don’t let SPY’s expense ratio turn you off, though. It, too, is very low.
You can invest in multiple S&P 500 ETFs
Ultimately, there’s not a huge difference between the investment choices above. And you also don’t have to choose one over the other. If you’d rather own a few different funds, so be it. The key is to hold an S&P 500 ETF in your portfolio for a good number of years so you can grow your money over time.
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