All articles tagged with #index funds
Jim Cramer recommends a three-asset investment strategy for early retirement: 45-50% in index funds, 45-50% in five carefully chosen stocks (including some speculative), and 5-10% in 'insurance' assets like gold and bitcoin to hedge against market downturns. While his approach offers a diversified plan, it involves risks, especially with concentrated stock holdings and volatile assets like bitcoin.
The ultra-wealthy focus on long-term investments in real businesses, diversify through index funds and REITs, and maintain discipline, principles that everyday investors can adopt using accessible tools and strategies for steady wealth growth.
Cathie Wood criticizes proxy advisory firms and the influence of index funds in opposing Elon Musk's proposed $1 trillion pay package at Tesla, arguing that the financial system's focus on passive investing and voting power of large institutional investors undermine innovation and shareholder interests.
The article explains how the S&P 500 index, created in 1957, became a highly profitable and influential financial product through its trusted brand, economies of scale, and its role as a common benchmark, generating billions in revenue for S&P Global from index funds, ETFs, and futures, while highlighting concerns about its current concentration in a few tech giants.
Self-made millionaire Ramit Sethi advises new graduates to invest 10% of their salary annually and increase it by 1% each year to become multimillionaires. He recommends starting with low-cost index funds to diversify portfolios and benefit from compound interest over time. Starting early, even with smaller amounts, can significantly grow wealth by retirement.
A market-beating fund manager warns investors about the "index waltz," where a few booming stocks like Nvidia and the Magnificent Seven tech giants dominate the S&P 500, leading fund managers to rush into these stocks to avoid underperforming the index. This behavior creates a dangerous cycle and poses a risk to ordinary investors who are flooding back into the stock market. The fund manager advises tempering euphoria for the biggest stocks and emphasizes the importance of not timing the market, while pointing out the underperformance of value stocks and international stocks compared to the market mania.
Super Micro Computer's shares surged 12% in premarket trading as it prepares to join the S&P 500 index, reflecting the increasing prominence of AI stocks in the benchmark index. The San Jose-based AI server maker has seen its shares soar 1,000% since the end of 2022, with a market value of $50.6 billion. Super Micro and Deckers Outdoor Corp will replace Whirlpool Corp and Zion Bancorp in the S&P 500 on March 18, leading to rebalance trading estimated at $30.1 billion. This move underscores the growing interest in companies capitalizing on the AI boom, following Nvidia's remarkable stock rally.
Simplify your retirement plan by investing in low-cost index funds such as the Vanguard S&P 500 ETF and the Schwab US Small-Cap ETF, which can help you build a nest egg of $1 million or more. The Vanguard S&P 500 ETF provides easy and low-cost exposure to 500 of the largest and most profitable companies in America, while the Schwab US Small-Cap ETF offers potential growth through exposure to smaller companies. Pairing these two funds can provide a low-cost way to profit from a broader swath of the U.S. economy and add diversification to your retirement investments.
Super Micro Computer's stock surged 13.5% in after-hours trading after it was announced that the company, known for selling AI-optimized servers, will join the S&P 500. This move will require index funds to purchase shares of Super Micro and Deckers Outdoor Corp, which are set to replace Whirlpool Corp and Zion Bancorporation in the S&P 500. Super Micro's stock has more than tripled this year, and its market value has surpassed $50 billion, leading to widespread investor speculation about its inclusion in the index.
Long-term investors have benefited from index funds, but some prefer individual stock selection. A company's return on invested capital (ROIC) can indicate strong long-term performance. A 20-year screen of the S&P 500 revealed 20 companies with the highest average ROIC, including VeriSign, Accenture, and Apple. These companies have outperformed the S&P 500 over 20 years, with Apple showing the best returns. VeriSign stands out with the highest ROIC in the S&P 500 due to its exclusive rights for domain registrations.
Bank of America analyst Michael Hartnett coined the term "Magnificent Seven" to describe seven tech-focused companies that added over $5 trillion in value to the S&P 500 in 2023. Investing in an S&P 500 index fund effectively allocates funds to these companies, as they account for 28.37% of the index's value. The market has become less diversified, with 46.7% of the S&P 500's value concentrated in just 30 companies. While an S&P 500 index fund provides exposure to these companies, it may not be a good source of passive income, given the low average yield of its stocks. Mixing in quality dividend stocks with an S&P 500 index fund can provide exposure to large-cap growth while ensuring income opportunities.
Uber shares surged to a more than two-year high after S&P Dow Jones Indices announced that the company will join the S&P 500 Index later this month. The inclusion in the index is expected to provide stability and support for Uber's stock, as index funds and ETFs tracking the S&P 500 will need to buy shares of Uber. This move comes as part of the index's reconstitution, which will also see Jabil and Builders FirstSource joining the S&P 500.
A new study suggests that market timing strategies rarely work and that most investors are better off aiming for average returns by buying and holding the entire market through low-cost index funds. The study examined various market timing strategies and found that the ones that appeared to work were largely based on luck rather than a reliable method. Even if a strategy did work for a while, it would likely be quickly replicated by others, making it less effective. The study reinforces the idea of passive investing and focusing on minimizing costs to maximize market returns.
Claims that asset managers like Vanguard, BlackRock, and State Street "own" or "control" major U.S. corporations are debunked. While these companies are top shareholders in many prominent firms, they manage index funds on behalf of investors, not for personal gain. The asset managers use proxy voting to advance the best financial interests of their shareholders, and their voting records show that the majority of votes are on routine corporate matters. Claims of a "cartel" pushing ESG initiatives are unfounded, as the asset managers often disagree on key votes and have launched pilot programs to allow shareholders to direct voting on certain issues.
Despite recent reports suggesting that a significant number of actively managed funds and ETFs are beating their benchmarks, it is not easier to beat the market. The argument put forth by William Sharpe in 1991 still holds true: on average, active managers must lag behind broad market indexes. While some managers may outperform in the short term, it is a zero-sum game before transaction costs and a negative-sum game after. One solution is to create separate portfolios, one for long-term index fund investments and another for speculative attempts to beat the market, acknowledging both the arithmetic truth and the psychological belief in one's ability to outperform.