🐺Considered one of the safest investments on earth...

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Should you exclusively invest in the S&P 500?

Or should you buy individual companies instead?

Here are the pros & cons of buying the S&P 500:

Pro 1 → Diversification

When you buy the S&P 500, you’re automatically a diversified investor.

There are 500 (technically 503 stocks) on the S&P 500.

Active investors aren’t realistically able to diversify this much.

Pro 2 → Dynamic

The S&P 500 is always changing.

Companies are constantly removed and replaced.

Active investors always need to monitor their stocks.

If you invest in the S&P, it does that for you.

Pro 3 → Performance

The S&P offers long-term returns of ~9%.

From an effort-to-reward perspective, that’s pretty awesome.

That’s the definition of true passive income.

Pro 4 → Outperforming

The S&P 500 is hard to beat.

The majority of hedge funds never beat it.

Whether before or after fees, beating the S&P is no simple task.

These are pretty compelling reasons to invest in the S&P 500.

However, everything has a downside.

Let’s look at the cons 👇

Con 1 → International

The S&P exclusively holds American stocks.

If this is your only investment, you’re missing out on international gains.

Depending on your interest and understanding of other countries, this is a huge downside.

Con 2 → Foreign

If you’re outside the U.S., you might encounter currency exchange issues.

Every time you buy or profit from the S&P, you’ll need to convert that USD.

If you’re dollar cost averaging every paycheck, those exchange fees add up.

Con 3 → Ambition

If you’re insanely ambitious, the S&P isn’t for you.

If you want returns exceeding 7-10% annually, buy individual companies.

Although most investors never beat the S&P, I admire their confidence and ambition.

Whether the S&P500 is right for you depends on several factors.

Based on the aforementioned pros & cons, you’ll need to make that decision yourself.

The beauty of investing is we’re blessed with so many opportunities.

Do whatever you enjoy most!

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