S&P 500 Index Fund

What is an index Fund? 

- Its a type of mutual fund instead of investing in an individual stock, index Fund is you invest in a fund with a combination of different stock.

 • What is the S&P ?

– A market cap weighted fund of the largest 500 US listed companies.

– Vanguard, Fidelity, Schwab and others offer their own version of this index, but they are almost all identical, by definition. 

• Why does it matter?

– This is the most popular and first index fund.

– It has among the lowest fees of any fund (this is key!).

– When you hear “passive investing”, the S&P 500 index fund is the most common way to do it.

 • The tradeoff of risk & return.

– The S&P 500 is diversified over 500 companies, so if a single company goes bankrupt, it doesn’t impact your investment.

– The tradeoff is, if a few do very well, (GOOG, MSFT, FB, AMZN, AAPL), you benefit but not as much as if you owned those stocks individually.