If you unexpectedly receive a $1,000 windfall, such as a bonus or a gift, it can be tempting to spend it quickly. However, alternative choices, such as investing, are worth considering to maximize your money's value in the long run.
Many believe we need to be rich or wait for a recession before investing because we think "stocks are expensive." But the truth is, investing is a skill that takes time to master.
Successful investors have one thing in common: they make regular investments, even if it's just a small amount of money each time.
According to financial experts, various investment opportunities can help you make the most of your $1,000 in the short and long term, allowing the money to work for you.
At Buffett Online School, we also believe in investing in great companies you understand and utilizing Free Investing Resources to help you start your financial freedom and investment journey is one of the best ways to learn.
This article will teach you what investment you can start with $1000.
What is S&P 500?
The S&P 500 Index is a way to measure the performance of big U.S. companies based on their market value. It's considered the best indicator of large U.S. companies.
Many trillions of dollars are invested in or compared to this index, making it highly influential worldwide. Traditionally, the index includes 500 major U.S. companies, but this number can change.
The companies in the index represent about 80% of the total value of the U.S. stock market. The average value of the companies in the index is around $30.61 billion, with the biggest valued at $3.05 trillion.
Start Investing in S&P 500 ETF
Warren Buffett says we can start by investing in an S&P 500 ETF and beat most of the funds.
The S&P 500 ETF is an investment fund that aims to replicate the performance of the S&P 500 index. The S&P 500 index is a stock market index that tracks the performance of 500 large publicly traded companies listed on US stock exchanges.
An ETF is an investment fund traded on stock exchanges, similar to individual stocks. It exposes investors to a specific market index, sector, commodity, or asset class. The S&P 500 ETF is specifically designed to mirror the performance of the S&P 500 index.
When investing in S&P 500, you own a diversified portfolio representing a broad cross-section of the US stock market. Investing in a basket of 500 companies also provides diversification because it reduces the risk associated with individual stock holdings.
ETFs are also typically more cost-effective than mutual funds, with lower expense ratios. They provide liquidity as they can be bought and sold throughout the trading day on the stock exchange. It also gives you a convenient and efficient way to invest in a broad range of large US companies and participate in the overall growth of the stock market.
Top S&P 500 ETFs to Invest
The S&P 500 is a popular stock market index that includes 500 of the largest publicly traded companies in the United States. Investing in S&P 500 stocks can be a way to gain exposure to a diversified portfolio of well-established companies. Here are five S&P ETFs you might consider investing in:
SPDR S&P 500 ETF (SPY)
The State Street SPDR S&P 500 ETF is the oldest ETF in the US, and it usually has the most money invested in it and the highest number of trades. This makes it the biggest and most favored S&P 500 ETF.
Although the SPY is not the cheapest option compared to other ETFs, its large size, ability to be easily bought and sold, and long history make it valuable. It also pays a dividend similar to the other funds we reviewed.
Vanguard S&P 500 ETF (VOO)
This ETF is priced similarly to IVV. However, Vanguard's VOO ETF is relatively new compared to other funds, having been around for over ten years. Despite its shorter history, it has a good amount of trading activity, so investors who plan to buy and hold it for a long time should be fine with liquidity.
SPDR Portfolio S&P 500 ETF (SPLG)
The SPDR Portfolio S&P 500 ETF is similar to the SPY fund but has a lower cost designed for everyday investors who are conscious of expenses. The fund recently started tracking the S&P 500, but before January 2020, it followed the SSgA Large Cap Index.
The average number of trades for the SPDR Portfolio S&P 500 ETF is significantly lower than that of the SPY, meaning it has somewhat less liquidity. Additionally, the total assets under management (AUM) for SPLG are much smaller than SPY's.
iShares S&P 500 Growth ETF (IVW)
IVW has a different way of investing compared to the other ETFs mentioned. Instead of following the S&P 500, the iShares S&P 500 Growth ETF concentrates on the S&P 500 Growth Index. This index focuses on about half of the S&P 500, which tends to experience significant growth.
iShares Core S&P 500 ETF (IVV)
Blackrock's iShares Core S&P 500 ETF is almost as big and has been around for almost as long as the SPY fund. It also costs less to invest in, which can be an advantage for you.
Although it is traded less frequently than the SPY, it is still suitable enough for regular investors who plan to buy and hold it for a long time.
SPDR Portfolio S&P 500 Growth ETF (SPYG)
SPYG is an investment fund focusing on big companies with lots of growth potential. It selects around 300 companies from the S&P 500 Index based on growth factors like sales and earnings. The fund competes with other similar funds and sometimes makes bigger bets on certain industries. It also includes some mid-sized companies.
Prior to October 16, 2017, it was called SPDR S&P 500 Growth ETF. Investing in SPYG is like betting on these selected companies' growth, but remember that all investments carry some risks. Do your research before investing. Here's a quick video tutorial from Chloe Lin about SPYG.
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