Would you like to own an S&P 500 index fund like SPY or VOO?
Not only does that sound like technical language to most outside of investing circles, but it’s also not exactly a persuasive selling point.
If I said to a prospective client, would you like to own Apple? I would not have to do much convincing because they probably have one of their products in their pocket. They use it every day.
If I ask about the S&P 500, that takes a bit more explanation.
So, what is it? It’s a stock index comprised of the biggest companies in America.
Owning the S&P 500 index is a diversified way to own slices of shares in all those companies.
This prevents one from having to guess which one company may do well in the future.
After all, even the best have a hard time picking stocks. A 2022 CNBC article leaning on a SPIVA study wrote, “More than three-quarters of active mutual fund managers are falling behind the S&P 500…79% of fund managers underperformed the S&P last year.”1
Still, for many, that doesn’t say much. Words and data are not enough.
You need to SEE it.
That’s what the above chart from Visual Capitalist does.2 It doesn’t just TELL you the companies you own. It SHOWS you.
Amazing what logos can do.
- The banks where you deposit your hard-earned paychecks.
- The shows that your family streams in the evening.
- The utility companies that provide electricity to homes and businesses throughout the country.
- The gas that you pump at Chevron.
- The Tesla that you would like to drive but cannot afford.
- The Visa cards you swipe and see other people swiping in nearly every store you shop at.
Before you can decide whether you SHOULD own it through filters like risk tolerance and financial goals, you first must SEE it.
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Sources:
- https://www.visualcapitalist.com/complete-breakdown-of-sp-500-companies/
- “New report finds almost 80% of active fund managers are falling behind the major indexes” (3/27/2022). Accessed online: https://www.cnbc.com/2022/03/27/new-report-finds-almost-80percent-of-active-fund-managers-are-falling-behind.html