In the vaguest of senses, investing $1,000 in the benchmark S&P 500 stock market index at the very start of 2024 would have, by the year’s end, proven a wildly profitable maneuver. Indeed, a January 2 investment would have, by December 31, appreciated 23.31% to a hefty $1,233.10.
The popularity of the relatively simple strategy of simply taking a long position in one of the two indices that, theoretically, serve as a microcosm of the U.S. economy is exemplified by the number of exchange-traded funds (ETFs) tracking the index.
Still, due to their very number and the many ways the index can be tracked, finding the right ETF can be quite challenging. Seeking to help investors in a somewhat uncertain 2025, Finbold decided to examine which S&P 500 fund is the best one to invest $1,000 in right now.
Picks for you
What is the best S&P 500 ETF for 2025?
Unfortunately. there are multiple ways of viewing what the best S&P 500 ETF is. To begin with, the right fund should align with one’s outlook for 2025.
Considering that some experts, such as Juan Correa of BCA Research, believe a more defensive portfolio might be the right strategy for the coming 12 months, going with the most conservative stock market strategy imaginable and investing in the SPDR S&P 500 ETF Trust (SPY) could be the right call.
SPY is the most famous – and oldest – of the S&P 500 ETFs and offers broad market exposure with a fairly low expense ratio of 0.09%. Simultaneously, it provides strong liquidity, and its returns in 2024 have been strong at 23.99%.
Taking a page out of Warren Buffett’s book
Still, going for a strategy such as longing SPY could benefit from a slight upgrade of investing in Vanguard S&P 500 ETF (VOO). VOO has the benefit of lower costs at 0.03% while appreciating 24.15% in 2024.
Vanguard’s offering is simultaneously a favored S&P 500 fund of the legendary investor Warren Buffett.
Finally, one of the big concerns that emerged during 2024 is that the American stock market might have turned into a fatal bubble. Indeed, not only has growth been staggering, but the concentration of wealth has, likewise, been shocking.
For example, Nvidia (NASDAQ: NVDA) witnessed $2.1 trillion in market capitalization increase in the 366 days of the leap year, and the 10 biggest technology stocks saw their valuation surge by $6.6 trillion.
Should you bet against the Magnificent 7 in 2025?
Such a setup offers an interesting option to investors who are fearful that the market is overly concentrated but believe in the continued strength of the wider economy due to the recently launched Defiance Large Cap ex-Mag 7 ETF (XMAG).
XMAG is peculiar in that it aims to track large-cap stocks of the S&P 500 while deliberately avoiding investments in the Magnificent 7 stocks.
Theoretically. taking a long position in the fund could enable an investor to avoid the danger of a possible ‘big name’ bubble while still benefitting from the benchmark index.
Still, it is worth pointing out that XMAG is relatively new – and has not been a performer since launch – and is fairly expensive at 0.335%. Furthermore, it is only likely to pay off if the bull market persists in 2024, but there is a rapid move away from concentration and a falling out of favor for the Magnificent 7 stocks.
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