This isn’t to say that the S&P 500 winds up ahead every year. But over the course of the past 65 years, it’s delivered an average annual return of about 10.5%.
And that’s not the only thing that makes S&P 500 index funds a great investment. Here are a couple of other reasons.
1. They’re easy to invest in
When you buy individual stocks, there are a lot of different factors you need to look at. These include cash flow, debt, management, threats, and opportunities.
S&P 500 index funds don’t require that kind of legwork because you’re not putting a substantial amount of money into one specific company. Rather, you’re buying a bucket of stocks that you’re hoping will perform well over time.
This isn’t to say that you shouldn’t care about how stocks within the S&P 500 perform individually — particularly those with larger market caps. But remember, if you own S&P 500 index funds and a single stock has a bad day, it may not have such a huge influence, given that it’s one out of 500. And that takes the pressure off of you, as an investor.
