S&P 500 is currently in bear market territory after falling 20 per cent from its recent highs. Whether S&P 500 crashes or corrects by a few hundred points, a long term investor finds it as an opportunity to create wealth. Equities, as seen in the past, tend to drift upwards over the long term. S&P 500 is lower by 11 per cent over 1-year but over 3 year, 5-year and 10-year, the annualized return is above 12 per cent over all periods.
So, if you wish to get started investing in the S&P 500 index, read on to know what constitutes the index and how to invest in it.
S&P 500 is an index comprising global companies with robust business operations and established track records. All constituents of the S&P 500 are large-cap US stocks and constitute a fairly decent representation of sectors of the US economy. The US economy is home to innovation not just in the technology sector but also across other leading industries. Listed business on S&P 500 carries such an environment for the investors to ride on the next bull wave in any of the sectors.
Presently, inflation remains one of the biggest threatsCorporate’s margins thus impacting equity returns. So, should you stay away from investing? Niladri Mukherjee, head of Portfolio Strategy in the Chief Investment Office (CIO) for Merrill and Bank of America Private Bank in a recent note says, “Even during the Great Inflation decade from 1971 to 1980, consumer prices rose by a cumulative 117%, but the S&P 500’s total return was higher at 125%.
The top three sectors in the S&P 500 are Information Technology, Health Care and Communication Services. The returns of SPY closely track the returns generated by the S&P 500 index.The three major stocks of the S&P 500 index are Microsoft, Apple and Amazon by index weightage while Facebook, Berkshire Hathaway, Visa are some other constituents.
The ETF to invest in S&P 500 stocks is SPDR S&P 500 ETF Trust (SPY) which is popularly known as the SPY ETF. By investing in SPY ETF, you get exposure to some of the best US stocks across eleven major industries.
SPDR ETF is traded on major US Stock Exchanges and its easy to trade in them. Similar to buying equity shares, you can buy SPY ETF through a brokerage account registered in the US.