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What is the S&P 500? A complete guide to this key stock market index<\/p>\n
Understanding the S&P 500: What it is and why it matters<\/p>\n
Options, futures<\/a>, indexed annuities<\/a>, meme stocks<\/a>, cryptocurrency<\/a>, private equity<\/a>, volatlit<\/a> \u2014 huh?<\/p>\n If you\u2019ve heard some of those can help you build a comfy nest egg but have no idea how, you\u2019re probably not alone, experts said. There have never been more complicated financial products that advisers swear will propel you to a comfortable retirement, but some financial experts say forget about them.<\/p>\n Just as Americans \u201cMarie Kondo\u201d their homes<\/a>, they should do that with their investments.\u00a0And a simple strategy is often the best for most Americans.<\/p>\n \u201cYes, it is possible to build wealth and retire comfortably with a simple saving and investing strategy,\u201d said Alex Michalka, vice president of investment research at investment platform Wealthfront.\u00a0\u201cIn fact, I\u2019d argue that simplicity is often the most effective approach.\u00a0The key is defining the right kind of simple.\u201d<\/p>\n What’s ‘the right kind of simple’?<\/p>\n Don\u2019t fall asleep, but boring is good when investing, said Steven Conners, founder and president of Conners Wealth Management.<\/p>\n “Stocks are not supposed to be exciting,” he said.<\/p>\n Building wealth is about consistency and discipline, Michalka added. \u201cIt isn’t about picking individual stocks based on a hunch; it’s about following proven, timeless principles to help you build long-term wealth,\u201d he said. \u201cYou don\u2019t need to time the market or predict the next winning stock. Instead, the best thing you can do is to invest regularly in low-cost<\/a>, globally diversified index funds<\/a>, and make sure the risk level of your portfolio is right for you.\u201d<\/p>\n \u25b6 Tip: To determine your risk tolerance, consider how you would feel if your portfolio lost 20% in value. \u201cWould you see it as a buying opportunity and add more money or feel queasy? If you feel queasy, don\u2019t take so much risk,\u201d Conners said.<\/p>\n Also, remember to allocate assets based on your time horizon, financial experts said.<\/p>\n And rebalance as you age<\/a>, Conners said. \u201cIf you\u2019re in your 30s, 40s, you can be more AI (artificial intelligence) driven, more aggressive\u201d because you\u2019ve got time to recover from any downturns and are still in the wealth-building stage, he said. \u201cIf you\u2019re in your late 50s, 60s or older, make sure you make changes to focus on return of capital, not return on capital. Consider dividend stocks<\/a> or municipal bonds that produce income.\u201d<\/p>\n \u25b6 Tip: “Target-date funds” rebalance automatically. They hold a mix of stocks and bonds that starts aggressive (mostly stock holdings) and gradually grows more conservative over time.<\/p>\n Can building retirement savings really be this simple?<\/p>\n Decades of data, including the latest DALBAR report<\/a>, show that timing the markets or fancy investment moves, even by professionals, usually don\u2019t beat the S&P 500 index.<\/p>\n Additionally, many professionals charge high fees that eat into client returns, according to famed billionaire investment guru Warren Buffett, who once won a $1 million<\/a> bet on these principles.<\/p>\n At the end of 2007, Buffett bet hedge fund manager Ted Seides of Prot\u00e9g\u00e9 Partners that a low-cost S&P 500 index fund would perform better than a group of Prot\u00e9g\u00e9\u2019s hedge funds. Buffett\u2019s index investment bet was so far ahead that Seides conceded the match early, in the middle of 2017 instead of year-end.<\/p>\n \u201cWhen trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients,\u201d Buffett wrote in his 2016 letter to shareholders<\/a> about the bet. \u201cBoth large and small investors should stick with low-cost index funds.\u201d<\/p>\n Why are there so many complex financial products?<\/p>\n Complex financial products might help people, but the average American can\u2019t understand<\/a> them and often ends up making costly mistakes, some financial experts said.<\/p>\n \u201cThe ability of the financial industry to create complicated products with hidden fees leads people to buy expensive, overpriced\u201d products that are hard to price, track and compare, said John Campbell, Harvard economist and co-author of “Fixed: Why Personal Finance Is Broken and How to Make It Work for Everyone.” Still, companies make money on them, said Campbell.<\/p>\n The financial maze also contributes to inequity<\/a> because common personal finance mistakes by lower-income, less savvy investors reduce costs for rich people, he said. The simplest examples are fees for overdrafts or late credit card payments, which make money for companies and allow them to lower prices for customers who can better manage their money and tend to be wealthier.<\/p>\n Even retirement savings can be confusing. There are 401(k)<\/a>, 403(b)<\/a>, ABLE accounts<\/a>, IRA<\/a> \u2013 Ro<\/a>t<\/a>h<\/a> and traditional – and now, even Trump accounts<\/a> that all have different rules and limits. \u201cProfusion leads to confusion,\u201d Campbell said.<\/p>\n \u201cThere\u2019s a race between financial education and complexity, and complexity\u2019s winning the race,” he said. “We need to slow down that complexity and ideally, reverse that with simple products.\u201d<\/p>\n Meantime, Americans should control what they can and \u201ckeep it simple, stay the course, don\u2019t get distracted,\u201d Campbell said. \u201cThere\u2019s always new bright shiny objects, but just go about your way.\u201d<\/p>\n Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at\u00a0mjlee@usatoday.com<\/a>\u00a0and\u00a0subscribe to our free Daily Money newsletter<\/a>\u00a0for personal finance tips and business news every Monday through Friday morning.<\/p>\n","protected":false},"excerpt":{"rendered":"What is the S&P 500? A complete guide to this key stock market index Understanding the S&P 500:…\n","protected":false},"author":3,"featured_media":429595,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[49488,47770,113028,691,931,71622,58657,82471,17945,629,64,199684,3040,175645,144,2488,199683,62732,18217,158011,39461,67891,2487,49536,24148,4313,108012,4209,65780,17727,199686,199685,3628,146540,199688,9106,135,644,663,110045,19544,17709,84556,9404,942,50,1539,450,950,5678,39458,255,39460,27782,199687,18416,615,700,5682,85948,111204,6763,9580,11186,8727,158012,645,2490,158008,158009,448,34462,1439,18246,646,67,132,68,31965,4327],"class_list":{"0":"post-429594","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-401k-plan","9":"tag-401k","10":"tag-113028","11":"tag-ai","12":"tag-and","13":"tag-average","14":"tag-bond","15":"tag-bond-markets","16":"tag-bonds","17":"tag-buffett","18":"tag-business","19":"tag-composite","20":"tag-department","21":"tag-dow","22":"tag-dow-jones-industrial-average","23":"tag-enabled","24":"tag-exchange-traded","25":"tag-exchange-traded-funds","26":"tag-financial","27":"tag-financial-markets-news","28":"tag-financial-planning-u0026-management","29":"tag-funds","30":"tag-highlights","31":"tag-index","32":"tag-industrial","33":"tag-investing","34":"tag-investing-and-investments","35":"tag-investments","36":"tag-ira","37":"tag-jones","38":"tag-kondo","39":"tag-lynch","40":"tag-management","41":"tag-marie","42":"tag-marie-kondo","43":"tag-market","44":"tag-markets","45":"tag-modular","46":"tag-modular-story","47":"tag-mutual","48":"tag-mutual-funds","49":"tag-nasdaq","50":"tag-nasdaq-100","51":"tag-nasdaq-composite-index","52":"tag-neutral","53":"tag-news","54":"tag-of","55":"tag-overall","56":"tag-overall-neutral","57":"tag-pension","58":"tag-personal","59":"tag-personal-finance","60":"tag-personal-savings","61":"tag-peter","62":"tag-peter-lynch","63":"tag-plan","64":"tag-planning","65":"tag-retirement","66":"tag-retirement-u0026-pension","67":"tag-roth","68":"tag-roth-ira","69":"tag-savings","70":"tag-stock","71":"tag-stock-market-and-stocks","72":"tag-stocks","73":"tag-stocks-u0026-bonds","74":"tag-story","75":"tag-story-highlights-ai-enabled","76":"tag-su0026p","77":"tag-su0026p-500","78":"tag-the","79":"tag-treasury","80":"tag-u-s","81":"tag-u-s-department-of-the-treasury","82":"tag-u0026","83":"tag-united-states","84":"tag-unitedstates","85":"tag-us","86":"tag-warren","87":"tag-warren-buffett"},"share_on_mastodon":{"url":"","error":"Validation failed: Text character limit of 500 exceeded"},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/429594","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=429594"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/429594\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/429595"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=429594"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=429594"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=429594"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n