The S&P 500

Warren Buffet once bet the large hedge funds in America that none of them would outperform the S&P 500’s returns over the course of 10 years. He ended up being right about this bet as it outperformed all of the hedge fuds that are supposed to be made up of the greatest minds in investing. If you are unfamiliar with what the S&P 500 is, it is a representation of the performance of 500 of America’s biggest stocks. The performance of the S&P 500 is usually used to determine the state of the market in general at any given time. If the S&P 500 is doing well it is usually an indication that the market is on an upswing and if it is going down, it is usually a good indication that the market is on a downswing.

Now that you understand the power of the S&P 500 I would like to share with you how I use the S&P 500 to see good returns over time on my stock investments. I personally only buy dips in the S&P 500 when investing nowadays because I am not very big on high-risk trades and using this tactic is usually a surefire way to see stable returns each year. The S&P 500 has provided an average return of 11.88% each year since it was created in 1957, which is an amazing rate of return for an investor. If you were to only buy while the S&P 500 is down that rate of return would be even higher!

The best way to invest in the S&P 500 is with an index fund or a portfolio of stocks that represent the S&P 500. My favorite personal index fund to use for this is the Fidelity 500 Index Fund (FXAIX). You can buy this index fund on Fidelity with no fees. The way I like to do it is to wait till the market is down and put as much money as I feel comfortable with at that time. Then I simply leave it in there and keep adding to it whenever the market goes down again. I never pull money out of this index fund. I only add to it when the market is down and I don’t get scared when the market is bad because I am confident that these stocks will go back up just as they always have in the past.