S&P 500 Bull Market?

The S&P 500 stock index reached a historic milestone last Monday, as it scaled to a new all-time high. This accomplishment signifies the onset of a bull market, by two different definitions. In the past year, the S&P 500 surged by over 20% from its most recent low, and as of the previous Friday, it crossed another key bull market threshold by surpassing its previous peak.

For investors looking to participate in this remarkable growth, there’s good news: investing in a fund that tracks the S&P 500 index is a readily accessible strategy.

However, experts always caution that while the past performance has been exceptional, it should not be taken as a guarantee of future returns. Although the S&P 500 had a stellar year in 2023, finishing up 26% when considering dividends, it might not necessarily be the winning strategy by the end of 2024.

What is the S&P 500 Index?
The S&P 500 consists of approximately 500 large-cap equity stocks. This index operates on a market capitalization-weighted basis, meaning each company’s weight within the index is determined by its market capitalization, which is the total value of all its outstanding shares.

The top companies with the highest weights in the index include Apple, Microsoft, Amazon, Nvidia, Alphabet (with two share classes), Meta, Tesla, Berkshire Hathaway, and JPMorgan Chase.

How Can You Invest in the S&P 500?
Today, investors have various options to invest in the S&P 500, including mutual funds and exchange-traded funds (ETFs) that track the index. Some of the largest ETFs tracking the S&P 500 are SPDR S&P 500 ETF Trust, iShares Core S&P 500 ETF, and Vanguard S&P 500 ETF.

You can access these ETF’s through many apps and website that trade stocks, like Vanguard, Schwab, Fidelity, and TD Ameritrade.

Experts suggest that for stock investors seeking simplicity, this approach can be effective. Over time, passive strategies like index-based funds have demonstrated better returns compared to actively managed funds. Additionally, the costs associated with these passive funds are considerably lower than those of active strategies, making them an appealing choice for many.

The extent of a portfolio’s exposure to the S&P 500 index determines how much its balance is affected by the index’s fluctuations. That’s why experts typically recommend a 60/40 split between stocks and bonds, which can be adjusted to 70/30 or even 80/20 if an investor’s risk tolerance and time horizon permit.

Putting all your investments into the S&P 500 may not be advisable, especially if other segments of the market outperform it in 2024. Most experts advice some sort of split between stocks and bonds. Depending on your age, putting money into bonds may not be the best move.

It is also generally advised to have some diversification into stock categories besides U.S. large-cap stocks. With all of these caveats in place, starting your investing journey with the S&P 500 is not a bad move.

We are not financial advisers. Please do your one research before investing.

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