Investing $1,000 in any investment is a significant commitment, with the obvious goal of maximizing your return and minimizing your losses. A fantastic way to achieve this is to use a exchange traded fund (ETF), which allows you to buy shares like you would a stock and can be purchased with small amounts of money.
If you have $1,000 to invest right now, there are very good reasons why the money should be invested in an ETF that tracks developments. S&P500. Here’s why and which S&P 500 ETF is one of the best to own.
Billionaire investor and CEO of Berkshire Hathaway Warren Buffett has just two S&P 500 ETFs in his firm’s $325 billion investment portfolio, and the largest is the Vanguard S&P 500 ETF (NYSEMKT:VOO). Buffett’s company currently owns 43,000 shares of the Vanguard S&P 500 ETF, an admittedly modest position compared to his other holdings, but he has made clear his support for funds that track the S&P 500.
“In my opinion, for most people, the best thing you can do is own the S&P 500 index fund,” Buffett said at Berkshire Hathaway’s 2020 annual meeting.
Buffett also said at Berkshire’s 2013 annual meeting that almost all of the investment assets he leaves to his wife will be in an index fund when he dies. He said: “My advice to the trustee couldn’t be simpler: put 90% of the money in a very low-cost S&P 500 index fund. (I suggest the one from Vanguard.) »
Index funds have become a popular investment vehicle because they are hard to beat. The Vanguard S&P 500 ETF is passively managed, meaning the money invested in the fund is used to buy stocks of companies in the S&P 500 index without trying to focus on picking specific winners.
Not only is it easier than trying to figure out which stock will beat the market, but this strategy generally results in better returns. Search for morning star shows that only 29% of actively managed funds beat their passive index peers over the past decade.
If a fund is “passively managed” you may think you won’t be able to make any significant gains, but that’s not true. The Vanguard S&P 500 ETF has a total return of 257% over the past decade.
Another huge advantage of this particular ETF is that it has a very low expense ratio fee of only 0.03%. This means that if you invest $1,000, you will only pay $0.30 in fees and $10,000 invested in the fund will only cost you $3.
The S&P 500 has a historical average annual rate of return of 10.1% since 1957. Some years will be more and some years less, of course. Additionally, these returns do not take inflation into account.
