The stock market has consistently provided an average annual return of 10% over the past five decades, primarily represented by the S&P 500 index, which comprises the largest publicly traded companies in the United States. For investors seeking a low-cost option to invest in this index, the State Street® SPDR® Portfolio S&P 500® ETF (NYSEMKT: SPYM) may present a compelling opportunity. SPYM offers a way to own shares in all 500 companies included in the S&P 500, boasting an exceptionally low expense ratio of only 0.02%.
Recent performance data highlights the ETF’s impressive returns, significantly exceeding the S&P 500’s historical average. Looking at specific timeframes, SPYM has delivered average annual returns of 16.96% over the past year, 21.77% over three years, 14.15% over five years, and 15.52% over the last decade. Since its inception in November 2005, SPYM has achieved an average annual return of 11.01%, which, if sustained, could lead to substantial long-term growth for investors.
For instance, a $10,000 investment in SPYM today would grant exposure to a portfolio heavily weighted towards technology, with nine of the top ten holdings dominated by major tech firms like Nvidia, Apple, and Microsoft. The tenth largest holding, Berkshire Hathaway Class B, constitutes about 1.6% of the fund. If SPYM maintains its historical 11.01% return for the next 20 years, that initial investment could grow to approximately $80,768. A 35-year horizon could see it expand to around $386,966, and after 45 years, it could potentially surpass $1 million.
The simplicity and potential profitability of buying and holding an index fund like SPYM make it an attractive investment strategy for many. Its low fees lend it an added advantage as a core component of a diversified investment portfolio.
However, potential investors are advised to weigh their options carefully. The Motley Fool’s Stock Advisor team has recently highlighted ten stocks they believe could yield exceptional returns, which excludes the SPYM ETF. Historical data underscores this, as investments in Netflix and Nvidia shortly after their respective recommendations led to returns of $532,066 and $1,087,496, illustrating the potential returns of stock-picking against broader index investing.
As always, it is crucial for investors to conduct thorough research and consider their own financial goals when constructing their investment portfolio. The long-term growth projected in SPYM is enticing, yet opportunities in individual stocks may offer even more significant returns.
