It doesn’t take much money to get a lot out of investing. Give the stock market enough time, and compounding will take good care of you. But what if you had just $500 to kick-start your investing portfolio?
An index fund — designed to track a specific market index — would be an excellent choice to start. These funds are buckets of individual stocks lumped together and traded under one ticker symbol.
The Vanguard S&P 500 ETF(NYSEMKT: VOO) tracks, you guessed it, the S&P 500.
Here are three reasons investors should put at least their first $500 into this rock-solid index fund.
1. It’s a Warren Buffett pick
Warren Buffett is known for his legendary career as a stock picker and CEO of Berkshire Hathaway. Within Berkshire, he has a massive $365 billion stock portfolio with dozens of companies.
With all his immense investing talent, Buffett keeps just two index funds in his portfolio. Both happen to track the S&P 500, which isn’t a coincidence.
According to Buffett, owning an S&P 500 index fund is the best thing most investors can do, as he said at Berkshire’s 2020 annual shareholder meeting. One of the two index funds in Berkshire’s portfolio is the Vanguard S&P 500 ETF.
2. It tracks the world’s best index
Buffett’s fascination with the S&P 500 is well justified. The index itself represents about 500 of America’s most prominent corporations.
The U.S. is the world’s largest economy, so getting into the S&P 500 is a badge of honor that puts a company among the world’s best businesses. It’s hard to argue against the wealth our capitalist system has created.
The market can become volatile as a reflection of how buyers and sellers feel at any given time, but over the long term, the S&P 500 has always bounced back and risen to new highs. That remains true today, with the index now at all-time highs:
^SPX Chart
The Vanguard S&P 500 ETF hitches your wagon to this financial horse, and for practically nothing in return. All funds charge an expense ratio to compensate those running the fund, but this fund’s expense ratio is just 0.03%, or less than $0.02 on your $500 investment.
3. It provides instant diversification
Perhaps the best part of a fund like the Vanguard S&P 500 ETF is its diversification. It’s hard to buy many shares of stock with $500, but buy one share of this fund, and you’re instantly exposed to every company in the S&P 500. That means you own a tiny piece of all the “Magnificent Seven” stocks and hundreds more!
It might be tempting to buy one stock with $500, but what if something happens to that one company? The S&P 500 has proved to be resilient since its founding, and barring a doomsday economic scenario, it will still be here 10, 20, or 50 years from now.
And your money will be working for you all that time. You won’t find a better use for $500 than buying a fund like the Vanguard S&P 500 ETF.
Should you invest $1,000 in Vanguard S&P 500 ETF right now?
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TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
