Equities asset class

Equities

equities (e.g., stocks) https://www.investopedia.com/terms/e/equity.asp

When people talk about equities, they are usually speaking about owning shares in a company. For companies to expand and meet their objectives, they often resort to selling slices of ownership in exchange for cash to the general public. Buying these shares represents a great way to profit from the success of a company.

There are two ways to make money from investing in companies:

1. If the company pays a dividend
2. If you sell the shares for more than you paid for them

The market can be volatile, though. Share prices are known to fluctuate, and some companies may even go bust.

Is it a good idea to invest all of my savings into an S&P 500 ETF and live off the annual ~10%?

George Fullerton, Former Worked as an Adjunct Lecturer for Four Year at University College (2011–2016)6y

The operative phrase here is “All of my saving”. It is very unwise to invest all your savings into one type of investment vehicle and even in different investments. You should have a cash cushion for your current needs and emergencies. This “all or nothing” rule is unwise and unsafe. Dont be fooled by the hypes of some financial journalists. Yes the S&P index has richly rewared investors, when considering the results of a survey carried out from 1926 to the late 1990s, with all dividend reinvested, but you want current income. This means even if you were lucky enough to get a consistent 10% return this will be consumed and taxed rather than be reinvested to take advantage of compounding and dollar cost averaging. Probably some could be invested in bonds and utilities. This would depend on your time horizon. Older people such as retirees tends to be conservative because their goals are current income, preservation of assets and some gowth. Younger people such as those in their 20s to 30s can pursue growth and/or income over their working life, and of course continue working of continue to run their businesses.

Should I dump all my savings in the S&P 500 as I have no expenses?

Mike Berard, investing in stock market for 40 years. listen to w. buffet2y

The short answer is a resounding, NO. At any time, with zero warning, ANY investment can drop, a lot, and stay there for a long time. The longer answer is you cannot put all of your money in the stock market, you need other accounts for shorter time frames. Also, I am sure you do have some expenses, like food and clothing and utility bills and insurance. You must mean you have no debt, which is great. But, please, use different accounts for different times. ANY money that you might need in less than ten years should not be in the stock market, period, it is far too volatile. Use FDIC insured accounts for expenses due in days, weeks and a few months. Next, for a few months to a few years, use ultra short and short term bonds, for a few years to 9 years or so, use intermediate term bonds, then stock funds. And instead of just buying the 500 largest companies in America, and ignoring the other 94 nations with stock markets, buy the Vanguard index fund that invests globally, Total World Stock Market. Then, to get some exposure to smaller companies, use ultra low cost index funds that invest in companies that are not in the mega cap dominated index fund, Vanguard small and mid cap index funds, and a fund that uses overseas smaller companies. Finally, just because you have no expenses in the form of debt now, that could change quickly (I hope that doesn’t happen), so, you must be prepared. Just use the appropriate investment for your goals. Money markets are great short term investments, stocks are just the opposite, bonds somewhere in the middle. Happy investing!

If I put 100k into the S&P 500 and 100k into Berkshire Hathaway, what are my odds of a comfortable retirement 30 years from now?

Ryan Heath, Serial Entrepreneur, Investor, Speaker, Best Selling Author5y

For starters, here are a couple key factors:

1. For the novice investor, diversification is a better strategy than speculation. Meaning, having your money spread across a lot of investments is better than having it all on one. Therefore, the S&P 500 fund would be more diversified than Berkshire. But I would go a step further and say it is smart to have even more than just the S&P 500.
2. Berkshire has done exceptionally well in the past. But that was largely because of Warren and Charlie, who are both getting up there in age. It raises the speculation a lot to assume that their replacement is going to do as good a job as they did.

But let’s get back to the real question. If you set 100k aside for 30 years and grew it at a nice rate of return, would it be enough to retire on? There’s a handy tip to figure this out. It’s called the Rule is 72. You take 72 and divide it by your expected rate of return and the answer is the amount of time it takes your money to double.

So let’s assume you could earn 8% on your portfolio. 72 divided by 8 is 9. So in 30 years you could get a little more than three doubles. First double 100k goes to 200k. Second double it becomes 400k. Third double it becomes 800k. And with 3 extra years it just barely crosses $1million.

Let’s do it again assuming you earned 12%. 72 divided by 12 is 6. So if your money doubles ever 6 years you could get 5 doubles. That means your 100k would grow to $3,200,000.

Now that you’re retired you can reasonably withdraw around 5% annually. This means, depending on your growth rate, getting anywhere from 50k to 160k to live on in retirement. Keep in mind 30 years from now inflation is going to make that feel like 25k to 80k in today’s dollars. But if that is enough for you to live a happy life, you have enough to retire comfortably.

Is investing 100% of my portfolio in an S&P 500 index fund a good idea?

David Richards - Wealth Management Veteran

Good or bad idea generally depends on your individual preferences, as almost every investor is unique in terms of what they feel comfortable with. For your question I would differentiate in the two cases below:

1. It is a good idea if you invest for a very long Investment horizon. If you are lucky enough to be able to afford an investment horizon of 30 years, probably low-cost index funds (S&P 500 index) are the safest option, compared to anything. But be careful not to make sudden decisions in big crashes. It is not the easiest thing to do to buy an index fund and don’t touch it for 30 years. Most non-professional investors cannot just stick to this strategy for 30 years consistently.
2. It is a bad idea in every other case (eg. short/medium-term investment horizon, if you cannot stick to your strategy, take emotional decisions, etc). If like most people, you cannot sustain large crashes and would prefer a steady upward trend, then a more well balanced and diversified portfolio is the right pick for you. This should ideally include many more asset classes than just S&P 500. For example:
3. Short/medium-term investment horizon. If like most people, you cannot sustain large crashes and would prefer a steady upward trend, then a more well balanced and diversified portfolio is the right pick for you. This should include the following:
   1. Of course part of it will be the index-tracking funds, to capture the upside potential of the markets. Vanguard and Robinhood are very good sources of index trackers.
   2. Normal diversifiers like corporate bonds are always necessary for an all-weather portfolio. However, keep in mind that in every liquidity crunch most of the risky assets move together and move downwards.
   3. Safe havens, like government bonds (US, Germany, UK) still have their place in your portfolio. Same for gold. You can go for a gold ETF, like GLD.
   4. Look for alternatives. These can be alternative types of exposure, investment styles, methods, etc. Look for market-neutral assets and funds. At the toughest periods, the market-neutral investments will keep your portfolio beating. Here, there is a catch. Whether you can find good alternative funds depends on your investable capital and level of sophistication, and, indeed, market-neutral exposure is not the easiest thing to achieve as an ordinary investor, but there are a few apps that try to achieve that. I find the Daedalus Investment Platform interesting, but I am sure there will be others as well for jurisdictions not covered.
   5. Keep some cash. Not only as a safe haven but to also exploit opportunities when you identify them.

As a general principle, as an investor and not a trader, never try to time the markets. Be well-positioned for every market turn, but avoid making mistakes, driven by fear or greed. Cold-blooded investors are much better equipped to survive and thrive over time.

S&P 500 is a very good option for specific cases and investors.

Is it a good idea to put all my savings in a S&P500 ETF (add to it monthly) and check again in 20 years or do I really need bonds? My risk tolerance is very high and I don’t need the money until 2040.

Vaughn Mancha - Former Family Practice (1990–2016)Author has 3.7K answers and 9.2M answer viewsUpdated 4y

I did for 35 years. My first 2k is worth 80k today. I used Vanguard 500 (VOO) which was the cheapest. Now I’m in Fidelity 500 FXIAX which is 1/2 the cost. The cheapest 500 fund.

If young consider their total stock index, Fidelity FZROX which has NO fees. It can save you 10% of your money in 30 years and mirrors the S&P. Know that 80% of the market equity is in the 500. So even a total index fund is weighted to the 500.

I was 100% 500 till retirement 3 years ago then I took Buffets advice and took a 10% bond position, VTEB a tax-free bond ETF from Vanguard doing 8% this year.

Buffet is putting his wifes and kids inheritance in 90% VOO and 10% Schwabs, SCHZ. However, VTEB beat Schwabs and is tax-free. Take that Schwab.

Is it really profitable to invest in the S&P 500 for a 10 year period, and how much return could I make in that time if I start investing now?

Barry Gysbers - Lives in Washington (2016–present)Author has 4.3K answers and 2.3M answer viewsUpdated 3y

If you invested at the 2001 peak, you’d STILL be under water 10 years later.

You had to hold for TWELVE YEARS before you technically got back zero!

If you count inflation, as everybody really OUGHT to, it would have taken even longer.

Don’t let anybody lie to you.

The S&P 500 is not a “magic bullet”. You can lose money there, as everywhere else in the stock market.

It is only more difficult to BEAT the returns of the S&P 500, than any other measure, over an extended period of time. No actively managed funds can consistently do so.

They call it the “lost decade”.

Beware!

A little knowledge goes a long way.

My wife forgot about her inheritance, her mother’s stock market account. It was worth around $70,000 when her mother died, and about $80,000 when I eventually discovered it, about 4 years ago.

During the intervening 15 years, more or less, her account held primarily one ticker, LPX, where her mother had been an executive secretary to six bosses.

I assume that she knew a LOT about the business.

LPX fell in hard times and they cut the dividend entirely. The price of the shares tanked during the housing crisis, to around $1.35 or so, if memory serves me correctly. Nearly bankrupt, in other words. It returned to profitability, and the stock gradually rose to a tiny bit over where it started. 15 years to make $10,000, which after inflation, might very well be zero.

Buy and hold people bother me all the time with facts.

The fact is this: if my wife had been even slightly interested in paying attention, she could have used the dividend cut as a sell signal to get out.

While she would have been foolhardy to buy back in at $1.35 with the whole wad, let’s pretend that she did. As you will see, timing is EVERYTHING! It will make you, or it will break you. Pretty much luck of the draw, though as a reader points out, consistency over time can help somewhat.

In only TWO tiny transactions, my wife would had made well over a MILLION DOLLARS!

As it is, with my guidance, tax filing, 401(k) ramping up, etc., (my wife had made ZERO 401(k) contributions on her own, before I met her), she now has over half a million dollars. Pretty decent, for only 5 years, but she remains completely unimpressed with EITHER one of my stories!

Sigh!

Is it true that the S&P 500 yields about 10% returns per year?

Pete Zeman - Investment Management ConsultingAuthor has 4.7K answers and 5.6M answer views4y

Yes, sorta. That’s roughly the average return for decades.

It’s also true that the average American has 1 testicle.

In real life, details matters:

If you started investing precisely 30 years ago, you got a 10% average annual return. If you started 20 years ago, you got 6%. 10 years ago, you got 14%. Since the Great Depression, there have been 70-some 20-year periods. Over any one of those periods, your return could be as low as 3% (1929–48) or as high as 18% (1980–99).

Your experience depends a lot on timing. For instance, if you started 11.5 years ago, you made 17%. That would also mean you had nerves of steel—or were entirely oblivious—and bought stock at the very bottom of the Financial Crisis.

In short, the variability of returns over time is precisely the reason that it pays to diversify into other stuff: small stocks, foreign stocks, bonds, etc.

Hope this helps.

Is it worth investing 100 dollars monthly in S&P 500 (ETF) for a long-term investment?

Jason C - Investor, trader, serial entrepreneur, 35 years experience.

Absolutely its worth it.

Let’s have a look at what would have happened if you had started doing this 20 years ago.

Here’s a chart that shows the return you would get if you started in 2003 and put $100 each month into your portfolio and adjusted it for inflation. The examples below are for the SPY ETF. I’d actually recommend the VOO ETF as it has lower fees than SPY, but I used SPY in this answer because VOO doesn’t have a 20 year history. Both funds track the S&P 500, but VOO will give you slightly better returns than SPY due to the slightly lower fees.

Not bad! You’d end up with over $106,000.

Ok…. so what would happen if you could start that portfolio off with a lump sum of $5,000, and then added $100 each month? Now we’re getting somewhere. That additional $5,000 up front has resulted in an additional $37,000, for a total of $143,000 after 20 years.

Ok, now let’s look at what would happen if you could start your portfolio off with $20,000 and managed to put in an additional $100 per month. Now, after 20 years you’re looking at over $360,000.

But wait….. there’s more.

What would happen if, instead of just investing all your money into the S&P 500? Let’s have a quick look at what it might look like if you put $50 each month into 2 different ETFs. This time, let’s look at a combination of SPY and QQQ. The Invesco QQQ Trust ETF tracks the Nasdaq 100 and is heavily weighted towards tech companies. That $100 per month now looks like this. That $106,000 in SPY alone has now managed to return you $144,000 by having some exposure to tech companies. Pretty cool.

What would happen if you started with $20,000 and managed to add $200 per month?

Now you’re looking at over half a million dollars, with a final balance of $526,000. That’s pretty healthy.

Here are a few tips:

1. If you’re able to start your investment journey with $100 per month and you keep adding to your fund whenever you have spare money, you’ll be able to do much better than that first chart. If you get a pay rise, add more. If you get a bonus, put 50% of it into the fund.
2. As you progress through your working career, you’ll be able to continue to add more and more as your income increases. I started my fund with just $20, many years ago, but now I’m adding $5,000 or more each month.
3. If you can start your fund with a bigger lump sum than $100, you’ll do better again.
4. If you can increase your income and start adding $200 per month instead of $100, you really start to make some serious money.
5. If your timeline is longer than 20 years you’ll be getting a higher return again. The power of compounding will be working in your favour. These charts don’t go back any further than 2003, but if you had reached that $526,000 ten years ago, it would now look something like this: $2,700,000

Just to be clear - this simulates what would have happened if your fund had reached $526,000 ten tears ago, and you had continued investing $200 each month. It’s not an accurate example because we’ve doubled up on the same time period in order to illustrate what would be possible in a bull market. That said, it still shows you the incredible power of compounding returns. If the market conditions are right, a 30 year timeframe, with a $20,000 initial investment, and just $200 added each month will make you a multimillionaire in thirty years.

Standard disclaimer - this is not financial advice, blah, blah. The market can go down as well as up. This is that would have happened in the last twenty years. No one has any idea what it will do for the next twenty years.

But, all that said, it does demonstrate the incredible power of long term investing in low cost, passively managed Exchange Traded Funds.

I’ll leave you with one more thought.

So many investors think they can beat the market by picking their own stocks. They invest in the latest big thing. They invest in what their friends tell them to buy. They listen to online “Gurus”. They read the articles on Yahoo Finance or Seeking Alpha and they watch YouTube videos where they’re told that “These Three Stocks Are Set to Double!!!”

So what happens to these investors? The average person? If you look at all investors, their return is pretty pitiful, averaging just 2.6%. That’s almost three times WORSE than if they had just put their money into the S&P 500. And, as we have already seen, over the last 20 years, we would have done significantly better than the S&P if we had split our investment into S&P and Nasdaq.

I wish you success on your investment journey. The earlier you start, and the more you can invest, the better you will do.

TODO

1. Warren Buffett’s 90/10 Strategy: A Simple Guide for Investors https://www.investopedia.com/articles/personal-finance/121815/buffetts-9010-asset-allocation-sound.asp
2. How To Start Investing in Stocks in 2025 and Beyond - https://www.investopedia.com/articles/basics/06/invest1000.asp
3. The ABCs of Mutual Fund Share Classes: https://www.investopedia.com/articles/mutualfund/05/shareclass.asp

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1. Stock market
2. ETFs
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4. ETFs vs Mutual funds
5. Warren Buffett Reveals How To Invest $10K If You Want To Get Rich
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