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S&P gain works only while USA works (while business investment is viable).
There has been, and is coming a time when USA business growth does not work.
Better have a plan B (and C).
At the moment.... USA business is working, when tax incentives die (sunset) in 2025, things may no longer work for the S&P. Or America. Lots can change very quickly. Such as China taking over Taiwan. That is a significant risk to the USA business economy. As are politicians here at home. (We have a very dysfunctional political system, in the brink of failure.)
If someone however enjoys learning about the market and how things work and thereby gain enough knowledge and comfort (and has enough money of course) to expand into other investment vehicles then it is more engaging and profitable. But hey, there is a lot to be said for boring.
I am 50, been at it since my mid 20's starting with just a 401k, then expanded into many other things but didn't pull any triggers for years. Just kind of studied, learned, watched, talked to others, and got a formal education (MBA), etc. As my knowledge and income grew, I had enough disposable income and knowledge to get into different things. I enjoy it and understand what I'm doing and the risks. I've done well but it's only within the past 10yrs that things really took off for me, so I was learning and going slow for 15 years (mostly index and mutual funds). My lifestyle hasn't changed a bit - no fancy anything, all paper money still. I just enjoy "winning" but don't really care to use my winnings for anything other than re-investments towards more winning.
So, only investing in the S&P is great. But if you have an interest in learning more it can be fun to get into more risk (and thereby reward). Many different ways to invest. Now that I've waded around in a few things and satisfied with what I know, I've been looking at Angel investing for something more to learn. Don't know if I'll ever do that but enjoy learning about it and passed up some opportunities that looked good and paid off. I am not at all upset that I missed them, I was not ready. Still not.
Starting in the S&P is great and may take you to into other things but even if it doesn't, it is a great way to invest. If you are interested in more, take a couple hundred bucks and pick something fun to put it in and see how that goes. Research it as if the couple hundred were your life savings.
S&P 500 is good if you have a long time horizon. Today the index is not cheap relative to earnings, and we've had annualized returns of more than 15% over the past 15 years. IMO, it's entirely reasonable to expect lesser returns in upcoming years, and possibly less than the long-run average.
Take a look at the charts in the link below to see the historical returns over periods from 1 year in length to 20 years. Also, the first chart shows the reversion to the mean effect.
I will never subscribe to the theory that "because it's gone up for so long I have a hunch it will decline soon." If I did, I'd never have put a dime into Amazon, Google or Meta.
I will never subscribe to the theory that "because it's gone up for so long I have a hunch it will decline soon."
I guess you're responding to my post? I didn't say anything about it declining soon. Just pointing out the significant variation of historical returns, even over periods of 10 years and longer.
Historically speaking, long periods of good returns have been followed by long periods of mediocre returns. Of course there is no theorem to prove this market behavior will persist, but IMO it's not an unreasonable proposition. I haven't adjusted my stock/bond allocation. Bonds yield 4%-5% today, and I expect stocks should match or exceed that over ten years. I revisit this question as stock and bond valuations change.
If someone however enjoys learning about the market and how things work and thereby gain enough knowledge and comfort (and has enough money of course) to expand into other investment vehicles then it is more engaging and profitable. But hey, there is a lot to be said for boring.
I am 50, been at it since my mid 20's starting with just a 401k, then expanded into many other things but didn't pull any triggers for years. Just kind of studied, learned, watched, talked to others, and got a formal education (MBA), etc. As my knowledge and income grew, I had enough disposable income and knowledge to get into different things. I enjoy it and understand what I'm doing and the risks. I've done well but it's only within the past 10yrs that things really took off for me, so I was learning and going slow for 15 years (mostly index and mutual funds). My lifestyle hasn't changed a bit - no fancy anything, all paper money still. I just enjoy "winning" but don't really care to use my winnings for anything other than re-investments towards more winning.
So, only investing in the S&P is great. But if you have an interest in learning more it can be fun to get into more risk (and thereby reward). Many different ways to invest. Now that I've waded around in a few things and satisfied with what I know, I've been looking at Angel investing for something more to learn. Don't know if I'll ever do that but enjoy learning about it and passed up some opportunities that looked good and paid off. I am not at all upset that I missed them, I was not ready. Still not.
Starting in the S&P is great and may take you to into other things but even if it doesn't, it is a great way to invest. If you are interested in more, take a couple hundred bucks and pick something fun to put it in and see how that goes. Research it as if the couple hundred were your life savings.
Have fun.
There is more than one way to skin a cat. But the bottom line is the probable result.
Would you recommend the average lay person to get into Angel investing over DCA into an S&P 500 index fund?
Would you recommend the average lay person to get into Angel investing over DCA into an S&P 500 index fund?
What? No! Heck no. Aside from the complexities, the average person can't get into Angel Investing even if they wanted to because they wouldn't qualify.
No, the average person who wants to invest should do index, ETF, Mutual funds. Stuff like that. If that average person becomes interested and educated, they should slowly expand into things like individual stocks. If they then learn and grow and are really interested and have the emotional strength and logical enough mind, they can get into more sophisticated things like options, pre IPO's, private equity, etc. Then if they have enough $ and the appetite they can explore more like Angel Investing but by that point, they would be a lot more than average.
I did not mean to imply that the average person should be anywhere near Angel Investing.
Is putting, all of your eggs in one basket, a good strategy?
A basket of the largest 500 U.S. companies? Yes it is. Even factoring in the weighting debates.
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