Got $500 to Invest in Stocks? Put It in This Index Fund.

It does not take a lot cash to get so much out of investing. Give the inventory market sufficient time, and compounding will take excellent care of you. However what should you had simply $500 to kick-start your investing portfolio?

An index fund — designed to trace a selected market index — could be a superb alternative to start out. These funds are buckets of particular person shares lumped collectively and traded underneath one ticker image.

The Vanguard S&P 500 ETF (NYSEMKT: VOO) tracks, you guessed it, the S&P 500.

Listed here are three causes buyers ought to put not less than their first $500 into this rock-solid index fund.

1. It is a Warren Buffett choose

Warren Buffett is thought for his legendary profession as a inventory picker and CEO of Berkshire Hathaway. Inside Berkshire, he has an enormous $365 billion inventory portfolio with dozens of firms.

With all his immense investing expertise, Buffett retains simply two index funds in his portfolio. Each occur to trace the S&P 500, which is not a coincidence.

Based on Buffett, proudly owning an S&P 500 index fund is the very best factor most buyers can do, as he stated at Berkshire’s 2020 annual shareholder assembly. One of many two index funds in Berkshire’s portfolio is the Vanguard S&P 500 ETF.

2. It tracks the world’s finest index

Buffett’s fascination with the S&P 500 is properly justified. The index itself represents about 500 of America’s most outstanding companies.

The U.S. is the world’s largest economic system, so moving into the S&P 500 is a badge of honor that places an organization among the many world’s finest companies. It is onerous to argue in opposition to the wealth our capitalist system has created.

The market can turn out to be risky as a mirrored image of how consumers and sellers really feel at any given time, however over the long run, the S&P 500 has at all times bounced again and risen to new highs. That is still true at this time, with the index now at all-time highs:

^SPX Chart

^SPX Chart

The Vanguard S&P 500 ETF hitches your wagon to this monetary horse, and for virtually nothing in return. All funds cost an expense ratio to compensate these working the fund, however this fund’s expense ratio is simply 0.03%, or lower than $0.02 in your $500 funding.

3. It supplies on the spot diversification

Maybe the very best a part of a fund just like the Vanguard S&P 500 ETF is its diversification. It is onerous to purchase many shares of inventory with $500, however purchase one share of this fund, and also you’re immediately uncovered to each firm within the S&P 500. Which means you personal a tiny piece of all of the “Magnificent Seven” shares and a whole lot extra!

It could be tempting to purchase one inventory with $500, however what if one thing occurs to that one firm? The S&P 500 has proved to be resilient since its founding, and barring a doomsday financial situation, it’ll nonetheless be right here 10, 20, or 50 years from now.

And your cash will probably be working for you all that point. You will not discover a higher use for $500 than shopping for a fund just like the Vanguard S&P 500 ETF.

Do you have to make investments $1,000 in Vanguard S&P 500 ETF proper now?

Before you purchase inventory in Vanguard S&P 500 ETF, contemplate this:

The Motley Idiot Inventory Advisor analyst workforce simply recognized what they consider are the 10 finest shares for buyers to purchase now… and Vanguard S&P 500 ETF wasn’t one in all them. The ten shares that made the reduce might produce monster returns within the coming years.

Inventory Advisor supplies buyers with an easy-to-follow blueprint for fulfillment, together with steerage on constructing a portfolio, common updates from analysts, and two new inventory picks every month. The Inventory Advisor service has greater than tripled the return of S&P 500 since 2002*.

See the ten shares

*Inventory Advisor returns as of March 11, 2024

Justin Pope has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Berkshire Hathaway and Vanguard S&P 500 ETF. The Motley Idiot has a disclosure coverage.

Acquired $500 to Spend money on Shares? Put It in This Index Fund. was initially revealed by The Motley Idiot

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