There is no such thing as a foolproof investment, but some have stood the test of time and can be called great long-term choices. These two are just that.
An S&P 500 index fund
The S&P 500 tracks the 500 largest public US companies and should be in every investor’s portfolio. The S&P 500 exposes you to large-cap and blue-chip stocks across all sectors, from healthcare to energy and technology. It’s all there.
You always want to diversify your investments, and the S&P 500 offers instant diversification with one investment.
When deciding which specific S&P 500 index fund to invest in, one of the main things you need to consider is the expense ratio charged. Minor differences in percentages may not seem like much on paper, but they can add up over time.
For example, the Schwab S&P 500 Index Fund (NASDAQMUTFUND: SWPPX) and SPDR S&P 500 ETF (SPY -1.38%), have expense ratios of 0.02% and 0.0945%, respectively. If you contributed $1,000 monthly to both funds for 25 years, receiving an average of 8% returns.
Historical performances do not guarantee that the trend will always be the same, but the S&P 500 continuously shows to be an excellent long-term investment.
International Index Funds
Researching individual companies to invest in can be difficult. Still, when it comes to international companies, it can become a challenge considering all the extra factors that can appear, only people who get paid to do this end up doing it.
Instead, we can invest in an international index fund. This way, you can get exposure to markets across the globe.
If you only invest locally, you’re limiting yourself on the chance of significant and solid investments. International stock should be a must in a well-rounded portfolio, and many international index founds contain thousands of companies.
For example, the Vanguard Total International Stock ETF (VXUS -0.32%) contains over 7800 companies in Europe, The Pacific, emerging markets, North America, The Middle East, and more.
There are international index funds that focus on developed markets and some on emerging markets, but you can find funds that cover both. Not only do you instantly invest in household names like Toyota and Samsung, but you also get a chance to invest in emerging markets, which generally present more growth opportunities.