It might sound like something from the Terminator films or a snazzy new Japanese hairdryer, but the S&P 500 could be the simplest way for you to start investing your new, hard-earned graduate salary. It is a beginner investor’s best friend.
Confident Investing Starts Here:
- Quickly and easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions
- Receive undervalued, market resilient stocks straight to you inbox with TipRanks' Smart Value Newsletter
What is the S&P 500?
The Standard & Poor’s 500 is a stock market index which tracks the performance of the 500 biggest companies by value listed on stock exchanges in the United States. An equivalent would be the FTSE 100 which tracks the performance of the 100 biggest U.K. listed companies.
You’ll find all of your favorite and perhaps least favourite companies on the S&P 500 index from tech titan Microsoft (MSFT), to Elon Musk’s electric vehicle maker Tesla (TSLA), retailer Walmart (WMT), oil giant Exxon Mobil (XOM), Big Mac maker McDonald’s (MCD) and tractor group Deere (DE).
How Does it Work?
Instead of buying shares in each individual company, which can be expensive and time-consuming, you can invest in all of the companies on the S&P 500 through what is known as an index fund.
A couple of examples of these types of funds on the TipRanks website are the Vanguard S&P 500 (VOO) and the SPDR S&P 500 ETF (SPY) They track the overall performance of the S&P 500 index rather than the ups and downs of an individual company.
This means that instead of being invested in say 5 companies in the S&P 500 which are all in or connected to the tech sector, you can own a piece of all of them across a range of industry sectors.
This helps you spread, or as they call it in financial circles, diversify your risk.
Think of the S&P 500 like a party. There on the dancefloor are the AI and tech stocks full of energy and excitement and sitting down at the tables with a nice glass of tap water are the older, slower but still profitable stocks in the financial or insurance sectors. You can maybe just make out in the dark corners those stocks who are down on their heels and cursing their luck. “I could have been somebody.”
Historical Guide
You can pat them on the shoulder but when it comes to the success of your fund, it only really matters how the party performs as a whole.
Historically, investing in the S&P 500 has brought more cheer than jeers. The annual return for the index in 2024 was 25%, and it has an annual average return of 10%.
It can be choppy with some years performing better than others. That could be down to an economic recession, war or a huge global event like the Covid pandemic.
But if you invest for the long-term and ride out those lows then you will make money from investing in the S&P 500 for very little effort.
Unless you like shouting into phones then leave the Wall Street wheeler-dealing to others. With an index fund, you just invest, lie back and let the market come to you. It really is a simple way to help you grow your wealth over time.
What TipRanks Can Offer Graduates
TipRanks.com is here to help you understand money and the investment world both in the U.S. and throughout the globe. We have a host of investment research tools to help you start and build your portfolio as well as coverage of the latest stock news and analyst forecasts and ratings.
Ready to Start Investing?
We can give you a boost to start your investing career. Click here for a special offer on TipRanks Premium for recent graduates!