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The inventory market has been on a wild journey to this point this yr. The Nasdaq formally entered bear market territory, falling greater than 25% because the starting of the yr, and the S&P 500 can also be down roughly 16% in that timeframe.

Whereas this downturn might sign {that a} full-blown crash is coming, no one is aware of for sure what the long run holds for the market. Even the consultants can not predict precisely how the market will carry out within the close to time period, and whether or not we’ll see a crash is anybody’s guess.

Market downturns is usually a sensible time to take a position extra, nonetheless, as a result of costs are considerably decrease. If the market does crash sooner or later, there’s one funding I will load up on: an S&P 500 ETF.

Young woman sitting at a desk looking at a laptop.

Picture supply: Getty Pictures.

What’s an S&P 500 ETF?

An exchange-traded fund (ETF) is a kind of funding that features a number of shares inside a single fund. An S&P 500 ETF tracks its namesake index, which means it accommodates all of the shares throughout the index itself and goals to reflect its efficiency.

As a result of it is not possible to put money into the S&P 500 index instantly, investing in an S&P 500 ETF is the following closest factor.

The first cause I plan to load up on such a funding is that it is extraordinarily more likely to recuperate from a market downturn. The index itself has confronted dozens of corrections, crashes, and bear markets over the many years, and it is at all times managed to rebound — no matter how extreme these downturns have been or how lengthy they lasted.

^SPX Chart

^SPX information by YCharts

Additionally, the S&P 500 itself contains shares from 500 of the biggest and strongest organizations within the U.S. Family names like Amazon, Apple, Alphabet, and Tesla make up the index, and if any shares are more likely to survive a downturn, it is these throughout the S&P 500.

Must you put money into an S&P 500 ETF?

The sort of funding is usually a nice choice for a lot of traders. Not solely is an S&P 500 ETF very more likely to recuperate from market volatility, but it surely’s additionally a straightforward, hands-off funding.

With an ETF, you are routinely investing in all of the shares throughout the fund. This implies you by no means want to fret about selecting particular person shares or deciding whether or not you need to promote specific investments. All you need to do is put money into the ETF, and it’ll do all of the give you the results you want.

For some traders, although, the hands-off nature of S&P 500 ETFs is usually a draw back. Should you want to have extra management over your portfolio, such a funding is probably not the most effective match. 

Additionally, by nature, S&P 500 ETFs can solely earn common returns. They’re designed to comply with the market, making it not possible for them to beat the market. For a lot of traders, the relative security of such a funding outweighs the typical returns. But when your main objective is to beat the market, you might be higher off investing in particular person shares.

The inventory market could also be shaky proper now, however downturns will be among the finest occasions to take a position since you’re shopping for at a hefty low cost. S&P 500 ETFs is probably not proper for everybody, however they could possibly be a sensible choice for you.


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