For novice investors, a prevalent suggestion is to “simply invest in an S&P 500<\/b> index fund.” However, there are multiple avenues to achieve this goal. A range of S&P 500 ETFs<\/b> provides the opportunity to invest in all the stocks of the 500 largest publicly traded companies in the U.S., typically with low fees. If you’re inclined to adopt a more aggressive investment strategy, consider a leveraged S&P 500 ETF<\/b>, which enables you to purchase stocks using borrowed funds.<\/p>\n
Let’s explore two well-known funds that allow you to invest in the S&P 500<\/b>. The State Street SPDR Portfolio S&P 500 ETF<\/b> (SPYM +0.07%<\/span>)<\/span> stands out as a straightforward, low-cost index fund that mirrors the performance of the S&P 500<\/b>\u2014whatever returns the index generates, this fund will pass on to you with minimal fees. Conversely, if you are willing to take on greater risk and volatility, the SSO Ultra S&P 500 ETF<\/b> (SSO +0.14%<\/span>)<\/span> serves as another option; it is a leveraged ETF designed to double the daily performance of the S&P 500<\/b>.<\/p>\n Over the previous decade, SSO<\/a><\/b> has delivered an impressive average annual return (based on net asset value) of 21.2%, while the non-leveraged SPYM<\/b> has produced 14.2% annually. Nevertheless, selecting the optimal ETF involves more than just examining past performance. Here\u2019s a quick overview of how investors can effectively differentiate between SSO<\/b> and SPYM<\/b>.<\/p>\n Image source: Getty Images.<\/p>\n<\/div>\n <\/p>\n If you seek a straightforward, cost-effective way to invest in the S&P 500<\/b>, the State Street SPDR Portfolio S&P 500 ETF<\/b> emerges as one of the top choices. This fund boasts an exceptionally low expense ratio of just 0.02%, placing it among the most affordable options in the investment landscape.<\/p>\n Regarding its holdings, the composition is quite simple. This ETF provides exposure to the entire S&P 500<\/b> index, which represents approximately 80% of the overall U.S. stock market<\/a><\/b>. The top ten holdings predominantly feature major technology companies such as Nvidia<\/b>, Apple<\/b>, and Microsoft<\/a><\/b>, in addition to Berkshire Hathaway<\/b> Class B shares, showcasing a blend of innovation and stability.<\/p>\n Some financial analysts have recently cautioned that the S&P 500<\/b> may not be as diversified as it once was, given the significant weighting of technology stocks. Nevertheless, recent trends indicate that investment capital appears to be shifting away from tech and into the myriad of other stocks within the S&P 500<\/b>.<\/p>\n This is one reason why SPYM<\/b> has outperformed the technology-heavy Nasdaq-100<\/b> index year-to-date. Even in a challenging environment for tech stocks, SPYM<\/b> remains a potentially advantageous investment.<\/p>\n State Street SPDR Portfolio S&P 500 ETF<\/p>\n<\/div>\n<\/div>\n Today’s Change<\/p>\n (0.07%) $0.06<\/p>\n Current Price<\/p>\n $82.44<\/p>\n<\/div>\n<\/div>\n<\/div>\n Day’s Range<\/p>\n $82.21 – $82.72<\/p>\n 52wk Range<\/p>\n $59.81 – $82.72<\/p>\n Volume<\/p>\n 5.8M<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n The S&P 500<\/b> index generally delivers an average annual return of around 10% over the long term. However, many investors desire faster growth of their investments. By utilizing borrowed funds (leverage) to purchase stocks, investors can significantly amplify their returns when share prices increase\u2014although leverage also magnifies losses when prices decline.<\/p>\n The State Street SPDR Portfolio S&P 500 ETF<\/b> allows you to harness the power of leverage to achieve two times the daily performance of the S&P 500<\/b>. Therefore, if the S&P 500<\/b> rises by 1% tomorrow, your shares in SSO<\/b> would increase by 2%. However, it is crucial to recognize that leverage also heightens downside risk: If the S&P 500<\/b> falls by 2% in one day, your shares would decrease by twice that amount, or 4% in a single day.<\/p>\n SSO<\/b> boasts a solid long-term performance record, often outperforming the S&P 500<\/b>. If you believe that the stock market will consistently yield around 10% annually, and you can tolerate the short-term fluctuations that come with leverage, then this could be a worthwhile strategy for investing in the S&P 500<\/b>.<\/p>\n Today’s Change<\/p>\n (0.14%) $0.09<\/p>\n Current Price<\/p>\n $59.98<\/p>\n<\/div>\n<\/div>\n<\/div>\n Day’s Range<\/p>\n $59.67 – $60.39<\/p>\n 52wk Range<\/p>\n $33.47 – $60.39<\/p>\n Volume<\/p>\n 2.3M<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n Despite its appeal, there are two critical reasons why SSO<\/b> may not be suitable for the majority of investors. The first is the fee structure. This ETF imposes a net expense ratio of 0.87%. This rate is relatively high compared to other ETFs, as the SSO<\/b> fund managers employ complex trading strategies that rely on leverage and derivatives. If you are concerned about fees, opting for a straightforward low-cost index fund like SPYM<\/b> is a more prudent decision.<\/p>\n The second reason for avoiding a leveraged ETF like SSO<\/b> is that the long-term returns may not be as impressive as one might expect. Since its inception in June 2006, SSO<\/b> has achieved average annual returns of 14.5%. While this is better than SPYM<\/b>‘s long-term average of 10.7% per year since November 2005, it is not nearly double. Doubling the daily performance of the S&P 500<\/b> does not equate to doubling the long-term performance, and there are instances where losses can be amplified beyond the gains.<\/p>\n For instance, in the past five years, SSO<\/b> has appreciated over 105%, surpassing SPYM<\/b>‘s 65.3% gains, yet it is not twice as much.<\/p>\n SSO data by YCharts<\/p>\n Additionally, year-to-date, SPYM<\/b> has decreased by 0.32%, while SSO<\/b> has experienced a decline of 2.49%. Achieving two times the daily return of the S&P 500<\/b> does not guarantee you will receive two times the long-term return; you may be exposing yourself to excessive risk for insufficient long-term benefits.<\/p>\n SSO data by YCharts<\/p>\n For day traders looking to capitalize on short-term market movements based on anticipated stock market trends, a leveraged ETF like SSO<\/b> might be appealing. However, for the majority of long-term investors focused on retirement savings, keeping investment strategies simple with SPYM<\/b> is advisable.<\/p>\n<\/div>\n![\"A](\"https:\/\/g.foolcdn.com\/image\/?url=https%3A%2F%2Fg.foolcdn.com%2Feditorial%2Fimages%2F864185%2Fgettyimages-1147352183-1200x801-d21b45d.jpg&w=3840&op=resize\")
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\n<\/p>\nDiscover the Benefits of SPYM: A Low-Cost S&P 500 Investment Option<\/h2>\n
![\"State](\"https:\/\/g.foolcdn.com\/image\/?url=https%3A%2F%2Fg.foolcdn.com%2Fart%2Fcompanylogos%2Fmark%2FSPYM.png&w=128&op=resize\")
<\/div>\nKey Data Points<\/h3>\n
Explore SSO: The Leveraged ETF for Enhanced S&P 500 Returns<\/h2>\n
![\"ProShares](\"https:\/\/g.foolcdn.com\/image\/?url=https%3A%2F%2Fg.foolcdn.com%2Fart%2Fcompanylogos%2Fmark%2FSSO.png&w=128&op=resize\")
<\/div>\n<\/div>\nKey Data Points<\/h3>\n
Understanding the Advantages of Choosing SPYM Over SSO<\/h2>\n
![\"SSO](\"https:\/\/i0.wp.com\/media.ycharts.com\/charts\/3cb28e7358a7323d30b11cc303a88ba2.png?resize=720%2C456&ssl=1\")
<\/p>\n![\"SSO](\"https:\/\/i0.wp.com\/media.ycharts.com\/charts\/caac0067f59235a57a469bb989331b2f.png?resize=720%2C456&ssl=1\")
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