Investing Tips for Millennials - Simplify Investing - Own the S&P 500
Investors have thousands of choices of stocks, exchange-traded funds and mutual funds. So how do you select your long-term investments? Using the principle that simplicity is sometimes a very good guide, consider investing in the broad United States stock market as defined by the Standard & Poor's 500 stock index. The S&P 500 includes the 500 largest publicly traded companies in the U.S. Thus, it is a diverse mix of all types of companies like IBM, General Electric, Microsoft and Colgate that provide goods and services to the U.S. and the world. With the S&P 500 you don't have to attempt to pick a few stocks that may or may not do well.
As a shareholder of the S&P 500 you are entitled to benefit from the good fortunes of these companies so as they grow their businesses and profits, their stock prices will increase and you'll make money from this price appreciation. Some of the companies will generate excess cash and distribute it to shareholders in the form of cash dividends. You may take the dividends in cash or you may reinvest them and buy more shares of stock.
The combination of dividends and stock price appreciation ensures that your long run returns will be greater than many other types of investments. Of course there will be periods when the stock market is doing well and some years when it's doing poorly. But over the long run you can expect the S&P 500 to rise in price.
The following three low-fee exchange-traded funds (ETFs) track the S&P 500 and pay quarterly dividends: iShares Core S&P 500 ETF (IVV), SPDR S&P 500 ETF Trust (SPY) and Vanguard S&P 500 ETF (VOO). See S&P 500 Exchange-Traded Funds (ETFs) for price, dividend and return charts and information for three ETFs.
You can buy these ETFs through a brokerage account or from ETF providers. See How to Buy iShares ETFs and Buy your Vanguard ETFs
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