We want to help you make more informed decisions. Some links on this page — clearly marked — may take you to a partner website and may result in us earning a referral commission. For more information, see How We Make Money.
With the stock market’s recent volatility, you may be wondering if now is the right time to start investing. The answer is yes.
As of Jan. 24, the Dow Jones Industrial Average was down more than 1,000 points in a single day and the S&P 500, which investors use to gauge how the market is doing, dropped 10% from its recent high.
Dramatic drops like these can be scary. But no matter what’s going on with the market at any time, it’s important to hold onto your investments. The stock market ebbs and flows, and corrections like these are just par for the course.
So if you’re trying to get into the market now, don’t wait. Index funds might be a great choice for you.
An index fund is a type of pooled investment — either a mutual fund or an exchange-traded fund (ETF) — that tracks the performance of a particular market or sector. For example, there are index funds that track the performance of the S&P 500, the Nasdaq Composite, and the Dow Jones Industrial Average. Any of these funds can be great for your portfolio, because they mirror a broad, diversified swath of the stock market. But they have their differences.
To help you learn more about index investing, we’ve created a guide on these three popular large-cap indexes and spoke with two investment experts to help you decide which to add to your investment portfolio.
S&P 500 Explained
The S&P 500 is an index that includes 500 of the largest publicly-traded companies in the United States. But while it includes just 500 companies in the U.S. stock market, these companies’ shares make up about 70% of the value of the total stock market.
As a result, it’s often used as a proxy for the stock market as a whole. For example, when investors and analysts talk about how “the stock market” is performing, they’re often referring specifically to the S&P 500.
Pro Tip
If you’re looking for just one index that can provide broad exposure to the large-cap U.S. market, the S&P 500 is it. It’s often used as a proxy for the market and combines some of the benefits of both the Nasdaq Composite and the Dow.
The S&P is …….
Source: https://time.com/nextadvisor/investing/sp500-nasdaq-dow-compared/
