Nearly all of my financial investments are allocated to the S&P 500 Fund. I'll outline the reasons behind this choice.
I've got a fair chunk of my retirement savings stashed away, and the lion's share of it, around 90%, is parked in a single investment. It's the SPDR S&P 500 ETF Trust (SPY at 1.25%).
Now, it might seem a bit nuts to have so much of my portfolio tied up in a single ETF. But there are some compelling reasons why this strategy works for me, and it might just work for you too.
Predictable Profits
The SPDR S&P 500 Trust is an exchange-traded fund designed to mirror the performance of the S&P 500, a collection of around 500 major U.S. corporations. These businesses have been chosen to represent the broader economy, and the index is market-cap weighted, so the companies with the highest market caps have the most influence on the index's performance.
The S&P 500 is a widely recognized benchmark that shows how the broader stock market is faring, so investing in it is essentially placing a wager on a diverse assortment of large companies across various industries.
It's no wonder that this is typically a safe bet. In fact, over the long haul, the S&P 500 index delivers an average annual return of 10%. Funds identical to the SPDR S&P 500 Trust tend to churn out similar returns.
Since my retirement savings are intended to grow over decades, I'm betting on this relatively stable 10% annual return. This makes it a breeze for me to set my financial goals and have rock-solid confidence that I can achieve them.
No Expertise Required
Another reason why most of my retirement savings are in the SPDR S&P 500 Trust? I had no clue about investing when I made the selection.
Long story short, I knew a few years back that I wanted to put my money in an ETF that tracked the S&P 500. I went on Google, used my brokerage firm's fund screener, and found the SPDR S&P 500 Trust in no time. I was able to purchase it without having to dissect earnings reports, analyze company leadership or market position, or keep tabs on individual companies.
By investing in the SPDR S&P 500 Trust, I gave up the chance of earning higher returns by selectively investing in individual stocks. But I'm simply not cutting out enough time or have a strong enough interest in tracking down those investment gems that could potentially outperform the S&P, especially when even professional fund managers struggle to achieve this.
Instant Diversification
Because the S&P 500 encompasses companies from all industries, my investment portfolio is, in effect, diversified with a single investment.
The only additional step I needed to take was to put a small portion of my money into bonds to avoid overinvesting in stocks. Beyond that, I know I have a good balance of different industries through my investment in the SPDR S&P 500 Trust.
Low Cost
Lastly, the SPDR S&P 500 Trust has a very low expense ratio of 0.09%. That's an incredibly low fee, so I won't see my returns drained by high fees.
For all these reasons, it makes perfect sense for me to have a significant portion of my retirement savings in this S&P 500 ETF. If you're looking for an easy investment with dependable returns and minimal risk, it might be worth consideration as well.
Given your retirement savings' primary focus on long-term growth, you might consider allocating some of your 'money' towards strategies that aim for 'predictable profits'. The low-cost SPDR S&P 500 ETF, with its 'exchange-traded fund' structure, is designed to mirror the 'S&P 500', providing 'diversification' across multiple industries. This 'diversification' can be advantageous for individuals like yourself who 'had no expertise' in investing, as it allows for 'instant diversification' with minimal effort. The 'low cost' associated with this ETF also ensures that your 'money' isn't significantly affected by high 'fees', enabling you to maximize your 'retirement savings'.
