Putting $1,000 into any investment is a significant commitment, with the express goal of maximizing your return and minimizing your losses. An excellent way to do this is with one Exchange Traded Fund (ETF), which allows you to buy shares as you would a stock and can be bought with a small amount of money.
If you have $1,000 to invest right now, there are some very good reasons why the money should go into an ETF that S&P 500. Here’s why and which S&P 500 ETF is the best to own.
The billionaire investor and CEO of Berkshire Hathaway Warren Buffett has only two S&P 500 ETFs in his company’s $325 billion investment portfolio, and the largest Vanguard S&P 500 ETF (NYSEMKT: VOO ). Buffett’s company currently owns 43,000 shares of the Vanguard S&P 500 ETF, a small position compared to his other holdings, but he has favored funds that track the S&P 500.
“In my view, for most people, the best thing to do is own an S&P 500 index fund,” Buffett said at the 2020 Berkshire Hathaway annual meeting.
Buffett also said at the 2013 Berkshire annual meeting that almost all of the investment assets he will leave his wife will be in an index fund when she dies. He said: “My advice to trustees couldn’t be more simple: Put 90% of your money in a very low-cost S&P 500 index fund. (I suggest Vanguard.)”
Index funds have become a popular investment vehicle because they are hard to beat. The Vanguard S&P 500 ETF is strictly managed, meaning that the money invested in the fund is used to buy shares of companies in the S&P 500 index without trying to focus on picking specific winners.
Not only does this strategy usually result in better returns than trying to figure out which stock will beat the market. Research from Morningstar It shows that only 29% of actively managed funds beat passively-indexed peers over the past decade.
If a fund is “passively managed”, you might think that you won’t be able to make significant gains, but that’s not true. The Vanguard S&P 500 ETF has returned a total of 257% over the past decade.
Another big advantage of this particular ETF is that it has very little expense ratio Only 0.03% fee. That means if you invest $1,000, you’ll pay just $0.30 in fees, and $10,000 invested in the fund will cost just $3.
The S&P 500 has a historical average annual rate of return of 10.1% since 1957. Of course some years will be more and some less. Also, those returns do not account for inflation.
