The strength and the resilience of the US economy to regain its earlier stature are something that most global investors are banking upon. President Biden’s $6-trillion budget proposal for 2022 is expected not just to propel the economic indicators but also to bring the economy back on track from the economic crisis.
For investors, the S&P 500, the top-most single indicator of large-cap US stocks, stands tall to capture the upturn in the economy early on. S&P 500 is trading at levels of around 4224 and is up by almost 12.5 per cent in 2021.
Some of the top stocks of the S&P 500 index include Microsoft (FB), Apple (AAPL), Amazon (AMZN), Facebook(FB), Google (GOOGL), Berkshire Hathaway (BRK.A), amongst others. But, then there are several top-notch global companies listed on the S&P 500 index, and holding most of them would not be possible for all.
A better investing alternative is through an exchange-traded fund (ETF). An ETF gives an investor not to go overweight on individual stocks but gives exposure to the index as a whole. An ETF, typically, tracks one specific index, and thus investing in it means you end up buying all the stocks of the index in the same proportion as held in the index. What’s more, in an ETF you get the live prices as trading happens all through the market hours and the cost of owning them is considerably low.
Here are 3 ETFs that track the S&P 500 Index:
1. SPDR S&P 500 ETF (SPY)
2. iShares Core S&P 500 ETF (IVV)
3. Vanguard S&P 500 ETF (VOO)
A comparison between SPY, VOO and IVV will show that there is hardly any difference, other than the issuers of those 3 ETFs and in their total AUM. Yes, their expense ratio differs slightly but to a beginner in the US stocks, picking any of them will meet the purpose of diversifying in global stocks.
Investing in SPY, VOO or IVV gives you exposure to a portfolio of all 500 stocks in the S&P 500 Index. To get started investing in the US stocks, buying either SPY, VOO or IVV, all of which are benchmarked to the S&P 500 index, can be a good starting point.
Choose any one of these 3 ETFs and consider them as your core holding for the long term. You end up owning the global portfolio not just cheaply in terms of cost but also get a diversified set of industries. The S&P 500 Index includes nearly 500 leading corporates across about 11 sectors and covers about 80 per cent of the market capitalization of the US stock exchanges.
The right way to buy the S&P 500 Index stocks could be by buying ETFs tracking the index. So, what’s stopping you from opening a US brokerage account and reaping the benefits of investing in global markets?
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