In addition, investors who actively choose stocks should also “consider” adding ETFs of the US stock market to their portfolios, and should not reject ETF tracking broader marker — the reason is simple, it’s the only stock worth holding forever, the better choice is the US stock S&P 500 index.
The famous SPY, IVV, and VOO ETFs track this index.
Note: You can use the “Querier to Annualized rate of return for S&P 500 Index” to instantly query the S&P 500 return for any year, or the S&P 500 annualized return for any two years.
The advantages of ETFs tracking market to individual stocks
ETFs that track the broad market have the following advantages:
- The only “stock” worth holding forever.
- Profitability: The annualized rate of return (IRR) of the US S&P 500, which represents the US stock market for the past 25 years, is 7.71%; if dividends are included, the performance will reach 9.47%.
- Low volatility: Generally speaking, stock prices fluctuate greatly. Since ETF covers many stocks, it can reduce price fluctuations.
- No need to use your brain (positive terms here): You don’t need to understand many of the rules of the game in the stock market, just continue to buy the ETF tracking the stock market you have locked in.
- No need to pay for basic research on individual stocks: You don’t need to understand the dynamics and competitiveness of the company, and you can save a lot of effort and time for basic research.
- The company that can keep up with the times, trends, and the best at any time: The constituent stocks that can be included in the US stock market index have strict requirements in all aspects, and they are all contemporary choices. Index compilation companies are responsible for establishing conditions for filtering constituent stocks. Investors don’t have to worry about it, and constituent stocks are updated regularly. It can meet the needs of investors who can keep up with the times, trends, and the best companies at any time.
The only stock worth holding forever
This sentence is definitely worth the test. Investors who actively choose stocks have spent their entire lives trying to find listed companies with long-term competitive advantages, but in fact, there can be no such companies exist “forever”–except ETFs tracking the broad market, because, in comparison, the companies included in the broad market index are all contemporary companies with higher competitiveness. The biggest feature of the market index is that it will be updated every other period of time, eliminating less competitive companies and replacing them with more competitive companies. This approach solves the most troublesome stock selection problem for active stock investors.
In the 50 years from 1965 to 2014, only 77 Fortune 500 companies remained in the S&P 500 index, which shows the high degree of elimination. It’s hard for the average person to keep up with the times, to identify the best companies of the day, and to maintain the best possible holdings in your portfolio — but the S&P 500 can do that for you.
The best time to invest in ETFs tracking the broad market
Especially in the event of a stock marekt crash, it is the best choice. Because at this time, the ground is full of good stocks to pick up, unless you usually do your homework and have a watch list. Even so, when the stock market crashes, most investors either want to wait to go deeper or dare not buy, completely forgetting their usual ambition to buy when the stock market crashes.
And when stock market crashes, by human nature, no one dares to buy even good stocks. If you want to buy a good stock that has fallen deep, most people will have psychological barriers, which is normal. However, the stock market will not crash every day, and the stock market will eventually end its dip and rebound. Everyone knows this concept. Therefore, when the crash is deep, it is most appropriate to buy ETFs that track the broad market.
The most suitable target for most people
ETFs that track the broad market have the advantages of stocks, requiring only a small amount of capital, and can be added or subtracted at any time according to your financial situation. Basically everyone has the qualification and opportunity to participate and get the chance to get rich.
ETFs tracking broad market is better
Other financial management methods are not as good as ETFs.
The biggest problem with real estate is the huge amount of funds required. Even to raise the down payment, it will take many years for the average person, let alone tied to a 20 or 30-year contracted mortgage, so that your golden time in life can only become slave to the bank.
Unless you are confident that you can beat the central banks of various countries, or think that you are smarter than Soros; average people is too difficult to make money continuously from foreign exchange, and the chance of getting rich is very low.
Gold cannot generate interest, and its price fluctuates very little. Unless there is a major war, it cannot continue to rise sharply. However, with the United Nations established, it is impossible for the world to have a major war that lasts for many years. Moreover, gold has the disadvantage of storage, and it is inconvenient to move and carry. Trading is not convenient, and the access and handling fees alone will cause you heavy losses.
Bonds have low volatility and low risk. I agree with this. It requires a large amount of capital investment, and most people don’t even have the opportunity to get started. The biggest disadvantage of bonds is that it is almost impossible to beat inflation, and the financial management method that cannot beat inflation is not much worse than putting your money in the bank to generate interest. Not only does your purchasing power decrease, but your wealth shrinks over time. This financial management method is simply to donate money to banks or wealth management companies to build buildings and help them lend you the money again.
I have always opposed spending a lot of money on insurance other than accident insurance, especially the endowment insurance that Taiwanese flock to, because this way of managing money is literally donating money to banks or wealth managers to build buildings and helping them lend the money to them.
You will only get a very meager payment (usually after inflation, it is almost unprofitable). It is always the banks or wealth managers who profit. Just imagine this set of money-making methods that banks or wealth management companies have come up with. Use the money of the money owner (that is, most of the poor working people in the society, not others) to invest and make money, run errands for you, only the meager profits are distributed back to the money owner (that’s you!). The errand guy takes all the money he makes and only gives a little money to the money owner. Is this partnership business model reasonable? That’s the truth.
But most people have been brainwashed by the media for a long time, and no one will give you a detailed calculation, if the payment is really good, such as what the media and wealth management practitioners have said can really make you worry-free. Do you think wealth management practitioners are doing philanthropinism? (A few days ago, they even wanted to go back and refuse to pay for COVID-19 pandemic insurance. Have you forgotten about this? ) Do you ever think where does the salaries of hundreds of thousands of their well-paid employee come from? In short, buying endowment insurance will only make you a modern tenant farmer and a lifelong slave to a bank or wealth manager.
Then you will ask back if you have an accident or fall ill, what should you do if you have no money? That’s the point of this article, self-reliance. As soon as you have money, you can buy ETFs that track the broad market as soon as you start working, as long as you buy, don’t sell under any circumstances, and when you really need money (such as when you have an accident or a serious illness, buy a car, go on vacation, and go abroad to play) Does not constitute a reason for needing money), sell the ETF that you have bought for a long time that tracks the market, isn’t it rich?
- “Stocks Better than the S&P 500, Procter & Gamble (P&G)
- “S&P 500 index next year performance, based on last century record“
- “Return rate comparison among Buffett portfolio, Berkshire stock price, S&P 500 over the years“
- “2022 S&P 500 Constitutent Stocks Performance“
- “Stocks Better than the S&P 500, Procter & Gamble (P&G)
- “S&P 500 vs. Nasdaq 100 index, how to choose a market index?“
- “S&P 500 index, the only stock worth holding forever“
- “Querier to Annualized rate of return for S&P 500 Index“
- “S&P 500 P/E ratio has been rising in the past century, S&P 500 PE Ratio and Average Querier“
- “A table comparing S&P 500, Nasdaq, Dow Jones, Philadelphia Semiconductor Index over the years since its inception and annualized returns“
- “Investors should care annualized rate of return (IRR), How to calculate?“
- “Most investors should invest ETFs tracking broad market“
- “US issued ETFs tracking US market is your best bet“
- “Top 10 ETFs and important major US stock market index“
- “Disadvantages of ETF investment“
- “Any strong reason to buy mutual fund?“
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