Investing: S&P 500 Index Funds

If you are thinking of taking out a loan from a Payday Depot, don’t hesitate to put away some of the funds you have borrowed into an investment. It is always a good idea to invest in an S&P 500 index fund. But what is it, exactly?

The S&P 500 index is basically just a list of the top 500 companies in the U.S. S&P, or Standard & Poor is an American investment committee that created the S&P 500 index back in 1957. This listing is actually reviewed every quarter. The investment committee makes sure that only the top 500 performing companies are listed. The committee takes into account a company’s size, representation, and liquidity. There are 506 stocks that constitute this index because there are companies that have various classes of shares and represent roughly around 80% of the total market value of the stocks in the U.S.

To name a few, the top companies in the S&P 500 index fund include Apple, Amazon, Microsoft, Berkshire Hathaway, Meta Platforms Inc. (formerly known as Facebook), and Tesla.

Is it advisable to put money in the S&P 500?

Even Warren Buffet attests to the credibility of this index fund. If you are willing to put the money and let it stay there for the long term, you will definitely not lose. It is more stable, and prices don’t fluctuate as much.

What are the disadvantages of the S&P 500?

Well, it is dominated by companies with large capital. It does not cover small companies that may have a higher growth rate in capital stocks. Also, it is mainly comprised of U.S. companies and does not include companies from other parts of the world like Europe or Asia.

What are the considerations in choosing an S&P 500 index fund?

The market for S&P 500 index funds is readily available, but it is still important to choose carefully and consider the following:

1. Expense ratio – It should be noted that almost all S&P funds are stable and relatively perform similarly. So, take note of the fees that you need to pay to keep it. If it is expensive to manage, you might lose instead of earn from it. It’s okay to keep funds with an expense ratio between 0.5-0.75% but stay clear from those with over a 1.5% expense ratio.
2. Dividend yield – Aside from the market value of a fund, investors usually enjoy a dividend from large-cap companies. Make sure to check dividend yield in order to still be profitable even if the market is down.
3. Investment – It is always wise to choose a fund with minimum investment. It is better to buy less at first and purchase a little bit more if it is within your budget.
4. Date of inception – You will not go wrong by choosing an old index fund because the inception date shows the fund’s track record, and its history can help you learn more about its volatility.

To sum it up, investment is not risk-free. There will always be a risk of losing but also a high chance of profitability. Investing in S&P 500 will not be easy, but it is a great way to diversify a portfolio.