One of the habits of highly effective investors is to buy the entire US market at low-cost by acquiring exchange-traded funds (ETFs) which mirror the S&P 500.
The chart above (used with permission from Prof. Dimson) shows why. Investors have made and lost money in every one of the markets you see above; it is easier to make more and lose less in a growing market. A little over 100 years ago, the US market accounted for 15% of the world stock market. Today, it has over a half!
The subject of exchange-traded funds is complex but until recently, the Monday Morning Millionaire Program stated that of the more than 5,000 ETFs, the six shown below are the ones that interest us.
- iShares Core S&P 500 ETF (IVV)
- Vanguard S&P 500 ETF (VOO)
- SPDR S&P 500 ETF Trust (SPY)
- Schwab U.S. Large-Cap ETF (SCHX)
- iShares S&P 500 Growth ETF (IVW)
- Guggenheim S&P 500 Equal Weight ETF (symbol RSP)
The first five are market-cap-weighted. The sixth one is equal-weighted.
In line with their asset allocation, Monday Morning Millionaire Program members keep form 30% to 70% in one of these with the balance in a money market fund.
The habit of buying the entire US market at low-cost by acquiring exchange-traded funds (ETFs) which mirror the S&P 500 is another way of saying don’t pick stocks. It is the third of six habits of highly effective investors. As Monday Morning Millionaire Program members know, these habits are: