The stock market can be unpredictable, and recent weeks have shown just how volatile it can get. Between mid-July and early August, the S&P 500 took a nosedive, dropping roughly 8.5%, and this decline brought the index dangerously close to correction territory – something that left many investors worried about what might come next.
The market has since rebounded, but if we consider yesterday’s slight decline, it is a reminder that the potential for another sell-off is something savvy investors are still mindful of.
In times like these, when uncertainty is in the air, having a strategy to protect your savings is essential; and while no investment is completely immune to market volatility, there’s one type of fund that stands out as a reliable choice for long-term growth, even during turbulent times: the S&P 500 ETF.
As mentioned in previous posts, an S&P 500 ETF is an exchange-traded fund that tracks the S&P 500 index, which consists of 500 of the largest companies in the U.S. Such companies are some of the healthiest and most resilient in the world, thus, they are more likely to survive and recover from periods of market volatility.
For example, in the Vanguard S&P 500 ETF, the five largest holdings include major players like Apple, Microsoft, Nvidia, Amazon, and Meta, and while these companies often experience significant hits during downturns, they have a proven track record of bouncing back from even severe crashes and bear markets.
Also, let’s remark that the S&P 500 ETF is not just a strong investment in theory, but history backs up its reputation as a reliable performer. Analysts at Crestmont Research studied the S&P 500’s historical returns over 20-year periods and found that every single one ended in positive total returns. This means that if you had invested in an S&P 500-tracking fund at any point in history and held onto it for 20 years, you would have made profit – regardless of how volatile the market was during that time.
Even in the last two decades, the S&P 500 has faced some of the most challenging periods in recent history, from the dot-com crash in the early 2000s to the Great Recession and the COVID-19 pandemic. And despite these downturns, the index is up by a staggering 278% since 2000. In other words, if you had invested in an S&P 500 fund in 2000 and simply held onto it without making any additional contributions, your investment would have more than tripled by today.
One of the biggest advantages of investing in an S&P 500 ETF is how low-maintenance it is. The stocks are already selected for you, and because this type of investment is best suited for long-term growth, you don’t need to worry about timing the market. The strategy is simple: buy now and hold for as long as you can. Over time, you’re almost guaranteed to see positive results, regardless of short-term market fluctuations.
Although the term “volatility” might sound worrying, there’s no need to stress too much about the market right now. If you do not already have an S&P 500 ETF in your portfolio, you might want to consider adding one. This investment is known for its stability and reliability, which means that it can help you handle market ups and downs with more confidence.
Ultimately, by choosing an S&P 500 ETF, you are making a straightforward decision that keeps your investment steady and well-positioned for long-term growth.
