2 Powerful Investments You’ll Thank Yourself For Later | Smart Change: Personal Finance

The Standard & Poor’s 500 It tracks the 500 largest US companies and is probably the most popular stock market index. This is for good reason: investing in an S&P 500 Index Fund can help you achieve diversification, which is one of the pillars of a good investment portfolio.

The companies in the S&P 500 span industries like technology, healthcare, utilities, consumer goods, and just about anything else you can imagine. You never want your portfolio’s performance to depend on too few companies or industries, and investing in the S&P 500 is one way to avoid that.

Historically, the S&P 500 has managed to return an average of 10% annually over the long term. With enough time on your side, the S&P 500 alone has proven to be a way to become a millionaire. If you contribute $500 per month with an annual return of 10%, you can accumulate $1 million in just over 30 years.

Before choosing a specific S&P index fund, make sure you are aware of the percentage of expenses it charges. Although these funds track the same index, some are more expensive than others, and there is no need to pay more for essentially the same investment.

It’s a big world outside of the United States, and there are tens of thousands of public companies in it. You are hurting yourself if you only invest in US companies; There are plenty of other great companies around the world that you can benefit from investing in.

Researching and investing in international companies can be a little boring because there are other factors to consider, such as a country’s politics and economy. Fortunately, investing in an international stock index fund can give you global exposure as easily as a single investment.

International markets are categorized as either developed or emerging. Developed countries usually have better infrastructure and mature economies, emerging countries are not fully developed but are heading in this direction. There is a bit more stability with companies in developed countries, but companies in emerging countries often present a better opportunity for excessive growth. When looking for an international equity fund to invest in, make sure that it includes companies in both markets.

You should aim to have at least 15% to 20% of your portfolio in international companies.

Investing doesn’t have to be complicated. If you are looking to be a good investor, you don’t need to spend hours every day reading financial statements or listening to earnings calls. You can be a good investor and never do either.

A good portfolio also doesn’t need 50 different individual companies. Investing in a few quality index funds ensures that you cover all your bases and put yourself in a position to receive great returns.

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