Why S&P 500 is the Best Long-Term Investment
An in-depth analysis of stock market returns throughout history and why passive investing in the S&P 500 is better than most alternatives.
Introduction
One of the most common questions I get from clients is: "Where should I invest my money for the long term?" My answer is almost always the same - S&P 500.
The S&P 500 is an index representing the 500 largest companies in the US, comprising about 80% of the American stock market's total value.
Historical Returns
Let's look at the data. The following chart shows the growth of a $10,000 investment over the years:
S&P 500 Investment Growth
Growth of $10,000 investment over 10 years
Why Not Try to "Time" the Market?
Research shows again and again that market timing doesn't work. Here's a comparison of different strategies:
Investment Strategy Comparison
Average annual returns by strategy (%)
Balanced Portfolio Composition
For most people, I recommend a simple portfolio composition:
Recommended Portfolio Allocation
Balanced diversification for long-term growth
Summary
"Time in the market is more important than timing the market" - Peter Lynch
Long-term investment in the S&P 500 index is the simplest and most effective strategy for most investors. If you want to discuss how to tailor an investment portfolio to your needs, contact me.