Today I will begin my series, “It is not just BEING in the market that is important, but WHAT you are in that is”. Let’s begin with investing in the S&P 500 and analyze five different funds tracking the S&P 500 in terms of performance and expenses.
One important point, investors should audit their current holdings returns vs. the returns of an S&P 500 Index fund. Let’s look at five different S&P 500 index funds and analyze their one-year price returns, expense ratios and dividend yields. We will see if there is a difference in which market funds to select.
Per the chart we can see the one-year return for the S&P 500 (the Market) is an extremely impressive 25.51%. What is even more impressive are the five featured market index funds that outperformed the market. The featured funds are:
VOO-Vanguard S&P 500 ETF
SPY-SPDR S&P 500 ETF
IVV iShares Core S&P 500 ETF
RSP Guggenheim S&P 500 Equal Weight ETF
VFINX Vanguard 500 Index Inv. Mutual Fund
All five funds have expense ratios ranging from .05 to .40% in addition to annual dividend yields of 1.50% to 2.05% (courtesy of Yahoo Finance).
So what can we glean from this info? Very simply, it proves my point. It is not being IN the market that is important but WHAT you are in that is. As one can see, there is close to an eight percent spread between the market and the leader RSP. Over time, large return spreads in addition to low expense ratios and good dividend yields can reap massive returns over other securities. Like always, past performance does not guarantee future returns.
How can you implement strategy? Simply compare these one year price returns with the returns of your securities. If yours securities are outperforming there is no need to go further. IF they do not, then it is time to re-examine your current holdings. If your account statement does not show your current returns it is time to roll up your sleeves and learn for yourself how to chart your holdings price performance vs. these general market alternatives.
In my upcoming Summer Financial Friday lecture series, these price performance chart set-ups are just one of the many areas I will be covering. For more info, go to my website thetraderseye.com for details. Starting in June, I will be presenting an intro and an advanced series. There will be something for everyone!
Plan your work, work your plan and learn to share your harvest!
Source: Yahoo Finance, Stockcharts.com
Full Disclosure-I do not hold any of the securities listed in this column.
DAVID O. ENGLAND is the founder of the Eye on the Market-Training Academy and retired associate professor of finance at John A. Logan College. For questions and upcoming seminar info, he can be reached at thetraderseye@gmail.com. The information above is for educational purposes only and is not intended to be financial advice. Your decisions to buy, sell, short, or hold any stock or investment product is a direct result of your own decision, free will, and research.
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