Steven Fiorillo
Seeking Alpha Analyst, Basis Point Podcast Co-Host
The S&P 500 is one of the best long-term investments, giving instant diversification across 500 of the largest US companies in one low-cost, tax-efficient fund. The index has returned about 10% a year on average with dividends reinvested, its dividend has grown about 7% a year over five years, and it has rallied back from nearly every crash or downturn, supporting steady dollar-cost averaging. x.comÂ
The Vanguard S&P 500 ETF works as a foundation that doesn't depend on getting every stock pick right. It gives exposure to about 500 large US companies for a 0.03% annual expense ratio, roughly $3 a year per $10,000 invested. The plan is to keep adding to it over time and build individual stocks around it. x.comÂ
The US stock market as a whole is pretty expensive relative to history, making this a better time to pick individual stocks than to put a lump sum into an S&P 500 index fund. x.comÂ
Buying the S&P 500 and forgetting about it for 30 years beats 95% of hedge funds. Average results are the winning strategy, yet almost nobody can sit still long enough to execute it. x.comÂ
Owning the S&P 500 and Nasdaq-100 through low-cost index funds captures tomorrow's winners as they emerge without predicting them, since both indexes keep replacing fading companies with stronger ones. Since inception, the S&P 500 fund is up about 814% and the Nasdaq-100 fund about 1,683%. Contribution rate matters more than timing: $400 a month at 10.5% for 30 years grows to about $876,000, double the $438,000 from $200. x.comÂ
An all-cash rental property beats the S&P 500 on cash flow. $150,000 in an S&P 500 index fund yields about $250 a month in dividends, while the same amount in an all-cash rental yields about $1,000 a month, with 4% annual property growth budgeted. x.com x.comÂ
Most retail investors who hold concentrated portfolios underperform a diversified benchmark like VOO. Depending on the study, typically 70-85% or more of those holding 10 or fewer stocks trail it most of the time, because of behavioral biases, higher volatility and missing the skewed winners that drive market returns. x.comÂ
The S&P 500 fund VOO beats covered-call income ETFs like GPIX and QQQI because covered calls cap upside, leaving long-run returns worse. Since GPIX's October 2023 inception, VOO has compounded 26.4% a year versus GPIX's 23.6%, while QQQ's 25.4% beat QQQI's 21%. Fees add drag of about 1.1% for GPIX and 2.2% for QQQI versus 0.1% for VOO, and large monthly payouts are tax-inefficient. x.com x.comÂ
Buying a broad index fund consistently over many years is one of the best strategies for most investors because it is simple, diversified and easy to stick with. US funds tracking the S&P 500 or Nasdaq-100, optionally with non-US exposure, have historically returned around 8-10% a year on average for patient holders. They are less volatile than individual growth stocks, need little upkeep and spare investors from reacting to news. UK pensions locked until 55-57 make holding long easier. x.com … Show more
Putting everything into the Vanguard S&P 500 ETF is hard to go wrong with, because most retail investors lose money trading individual stocks. That is the reply to a 36-year-old weighing liquidating everything into it and moving on with life. x.comÂ