The S&P 500 has had a stellar performance trajectory throughout 2024, returning more than 26% in the year ending December 27. As a proxy for the broader US economy, this indicator shows that the economic environment is broadly strong and continuing to grow. to talk. Of course, this does not mean that all stocks – or even all stocks within the S&P 500 – performed at the same level. In fact, investors looking for individual companies that stand out over the past year should keep in mind that their bar for beating the market is very high.
Many investors make a broad-based S&P 500 ETF or similar product a staple of their investment portfolio. Funds like the SPDR S&P 500 ETF Trust NYSEARCA: SPY Or the iShares Core S&P 500 ETF NYSEARCA: IVV It offers an easy way to access the index range with minimal effort on the part of the individual investor. Whether or not you already include one or more of these funds in your portfolio, there may be reasons to consider increasing your portfolio allocation in order to focus more on the S&P.
Winning the expense ratio war
Vanguard S&P 500 ETF today
Vanguard S&P 500 ETF
(As of 02:34 PM ET)
- 52 week range
- $428.64
▼
$559.96
- Dividend yield
- 1.09%
- Assets under management
- $592.52 billion
Expense ratios — the fees investors pay to ETF managers to cover costs like portfolio oversight and management, among other things — make a huge difference in the long-term returns of an S&P 500 ETF. SPY, the first-ever ETF and still the largest of all S&P 500 ETFs with more than $632 billion in assets under management as of December 26, 2024, has an expense ratio of 0.09%. Vanguard S&P 500 exchange-traded fund NYSEARCA: flightanother major player in the space but with a smaller asset base of $583 billion at the same time, has an expense ratio of 0.03%, or a third of the cost of SPY. It’s true that both of these fees are low compared to the broader ETF space, but the difference will compound over time for investors who buy and hold over a long period.
Perhaps more importantly, investors should note that ETF providers have had an incentive to lower their fees on S&P 500 funds as an incentive to withdraw additional assets — because the funds track the same index and are often functionally the same, the expense ratio is one of… A few metrics that can sway investors toward one fund or another.
The dollar cost average dominates
However, investors with assets already focused on S&P ETFs will likely benefit from continuing to contribute to these investments over time, thanks to dollar cost averaging. Because the S&P 500 has been trending broadly higher over time, it has reached new highs Dozens of times in 2024 alone– It is likely that, despite inevitable recessions, it will continue to reach new highs in the future. By periodically investing in S&P 500 funds, even when the index is at or near its all-time high, investors take advantage of dollar-cost averaging principles to maximize potential returns in the future.
Investors may look at the recent performance of the S&P 500 and assume that buying into an S&P ETF means buying at the top – typically an investment strategy to avoid! However, historically, the S&P 500 has peaked now, and it will likely go higher from here over the long term.
Interest on other funds
SPDR S&P 500 ETF Portfolio Today
SPDR S&P 500 ETF Portfolio
(As of 02:34 PM ET)
- 52 week range
- $54.87
▼
$71.64
- Dividend yield
- 1.09%
- Assets under management
- $55.26 billion
Investors have a range of other ways to access the S&P 500, including a growing number of mutual funds and index funds. However, ETFs often win on an expense ratio basis, especially compared to Series C mutual funds, which often have much higher expense ratios.
ETFs such as the SPDR Portfolio S&P 500 ETF NYSEARCA:SPLG It may also have an advantage over some other funds that focus on the S&P 500 Index because the latter can experience higher degrees of tracking error when the contents of a fund’s portfolio differ somewhat from the index itself, and thus yield different results over time. Funds may also be rebalanced at different intervals, which may contribute to tracking errors or a lack of transparency regarding portfolio content for investors.
Before you consider the SPDR Portfolio S&P 500 ETF, you’ll need to hear this.
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