The great thing about index investing is that you don’t have to pick the winners.
Much of the recent gain in the US stock market has been driven by just a handful of companies: Nvidia, Microsoft, Meta, Apple and Amazon.
But if you own an ETF with the S&P 500 index, you already own all those companies!
It’s funny. When you look at a portfolio of your investments and see just one ETF name and one number, or even just a few, it can somehow feel riskier than seeing a bunch of different stocks and a bunch of different numbers.
But owning individual companies is far riskier! Think about how hard it would be to pick these companies, and only these companies, to do so year after year, and to perfectly time when you buy and sell each stock so that you don’t give away all your gains. It’s way harder, takes way more time and adds way more stress.
You could’ve just bought the S&P 500 (or a more diversified ETF that includes it) and called it a day.
If you’re already doing that, you can sit back and relax, knowing you already own a piece of all the hot names you see in the headlines every week.