Investing $1,000 in any investment is a big commitment, with the clear goal of maximizing your return and minimizing your losses. One great way to do this is by using Exchange-traded fund (ETF), which allows you to buy shares as you would stocks and can be purchased with small amounts of money.
If you have $1,000 to invest right now, there are some good reasons to put your money in an ETF that tracks trading. Standard & Poor’s 500. Here’s why and which S&P 500 ETFs are one of the best to own.
Billionaire investor and CEO Berkshire Hathaway Warren Buffett has only two S&P 500 ETFs in his company’s $325 billion investment portfolio, the largest of which is Vanguard S&P 500 ETF (NYSEMKT: flight). Buffett currently owns 43,000 shares of the Vanguard S&P 500 ETF, a very small position compared to his other holdings, but he has made his endorsement of funds that track the S&P 500 very clear.
“In my view, for most people, the best thing to do is own an S&P 500 index fund,” Buffett said at Berkshire Hathaway’s 2020 annual meeting.
Buffett also said at Berkshire’s 2013 annual meeting that nearly all of the investment assets he would leave to his wife would be in an index fund upon his death. “My advice to the trustee couldn’t be simpler: Invest 90% of the money in a low-cost S&P 500 fund,” he said. “(I suggest the Vanguard fund).”
Index funds have become a popular investment vehicle because they are hard to beat. The Vanguard S&P 500 ETF is passively managed, meaning that the money invested in the fund is used to buy stocks of companies across the S&P 500 without trying to focus on picking specific winners.
Not only is this easier than trying to figure out which stocks will outperform the market, but this strategy usually leads to better returns. Search from Morningstar It shows that only 29% of actively managed funds outperform their passive index counterparts over the past decade.
If the fund is passively managed, you may think that you will not be able to benefit from significant gains, but this is not true. The Vanguard S&P 500 ETF has generated a total return of 257% over the past decade.
Another big benefit of this ETF is that its price is very low Expense ratio Fees are only 0.03%. This means that if you invest $1,000, you will pay only $0.30 in fees, and investing $10,000 in the fund will cost you only $3.
The S&P 500 has generated a historical average annual return of 10.1% since 1957. Some years will be more and some years less, of course. These returns also do not take inflation into account.
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