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If you're going to invest in index funds (and you should), don't pick the S&P 500. Why invest in 500 stocks when you could use the vanguard total market index
by tempestn 13y ago
If you're going to invest in index funds (and you should), don't pick the S&P 500. Why invest in 500 stocks when you could use the vanguard total market index instead, and invest in essentially the entire US market, with a management fee of 0.05% per year? Also, there's no need to take on unnecessary risk by concentrating investments in the US. Better to put a good portion in a broad ex-US fund as well. Vanguard has a good option there too, of course, but there are certainly others as well.
Also, if like me you're outside of the US, these all come in ETFs that can be bought anywhere and have similarly low fees.
- thebear 13y agoIndeed, investing in just the S&P 500 would be an example of poor diversification: you'd limit yourself to US large cap stocks. By recommending the S&P 500, Warren Buffet is saying, implicitly, that he believes in US large caps to the extent that he does not even want to diversify.
- tempestn 13y agoI would give him the benefit of the doubt and assume he was simply picking an index everyone has heard of. But regardless, yes, it would be poorly diversified.