Investing in the S&P 500 has become integral to wealth-building strategies, with Vanguard S&P 500 ETF and SPDR S&P 500 ETF allowing low-cost market exposure. Historically, the "set and forget" method has yielded about 10% average annual returns and outperformed many actively managed funds. With investments spread across 500 of America’s largest companies, these ETFs have provided diversification and stability. However, recent concentration within the index, where just 10 stocks make up around 40% of its market cap, raises concerns about the reliability of this strategy going forward.
The simplicity of buying and holding index funds like Vanguard S&P 500 ETF or SPDR S&P 500 ETF Trust has offered investors a low-cost, low-effort way to capture the market's long-term growth.
Historically, this "set and forget" approach has outperformed most actively managed funds, delivering average annual returns of around 10% over the long haul.
Today, just 10 stocks account for approximately 40% of the index's total market capitalization, a level of concentration surpassing even the dot-com bubble era.
The S&P 500's top-heavy structure is driven by the dominance of mega-cap technology and growth stocks, which have soared in value while other sectors falter.
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