Ep 22: Gradual Capital Growth for Risk Mitigation

Dol- Yeah.

So I'm, I'm a buy and hold investor, dollar cost averaging or, or lump sum as you, as you get money.

And really just the idea is that the index, and specifically the index committee for the S&P 500, is making the buy and the sell decisions.

So the, the S&P 500 is composed of 500 companies, but it's run by effectively an index committee, which is, which is a group of professional, you know, managers within the S&P Dow Jones indices that determine what companies get put in the index and what companies get taken out.

So all you have to do is hold that one index, and companies are consistently put in and taken out.

And effectively, the managers of those indexes are buying and selling as those companies are being, you know, included and removed.

And so all you need to do as an investor is hold onto it, let the index do its work, and benefit from the consistent earnings growth over time, and let that return consistently compound by reinvesting your dividends and, and, and watching the price increase over time.

And also, what you said earlier really struck a chord.

You're, you're not only investing in the top 500 companies, but you're also investing in the collective wisdom that made those companies the top 500 companies.

So it seems like you're leveraging quite a bit.Just by buying and holding this index?

Yeah.

And so there's just overall, like a, a lot of people really like the US stock market for, for a variety of reasons, and there's about 4,000 publicly traded companies right now.

And so the 500 companies in the S&P 500 represent collectively about 85 or 90% of the total value of that US stock market.

And so they really focus on the largest, most robust companies in the United States.

And one of the benefits of the S&P 500 is that they follow a methodology of investing across a broad range of sectors through, uh, the Global, uh, Industry Classification System, GICS.

So they're not just focused on one very, very narrow area.

You might have heard of, you know, the Mag Seven and their, their very large percentage of the index.

I think, you know, 30-plus percent at this point, and those are primarily tech-focused.

But the S&P 500 also has a breadth across all these different sectors, and the other 493 make up, you know, other sectors, whether it's financials or healthcare, et cetera.

And so by investing in one index, the S&P 500, you get kinda the best of both worlds.

You get some of the, the, the top-notch companies in the, in the strongest, fastest growing sector right now, which is technology and communications.

But also the breadth of all the other sectors so that when it, when eventually there is a rotation and something else comes and leads the way, you'll still be invested in it.

Would you say that one of the best ways to invest in, in the S&P is just to merely accumulate shares in the SPY, the, the S&P ETF, anything else?