SPY stock was the very first stock I purchased when I first began investing back in 2019. In fact, I bought shares of the index fund under VOO from Vanguard.
I bought in at around $320 per share, SPY stock price today is worth approximately $447. It’s crazy to believe the S&P 500 was worth $44 back in the 90s. It’s had a quite the climb and I’m excited to see my portfolio grow with this index fund.
Welcome to Franknez.com – today I want to discuss with you one of my favorite stocks and why I think it’s the perfect retirement vehicle.
Lets get started!
1. SPY Stock Growth
SPY stock is the perfect long term growth investment vehicle. The S&P 500 has an incredible 917% return since inception, and a 21.2% return year-to-date.
SPY stock is they type of stock that will always move in an upwards trend because the S&P 500 index tracks the top 500 companies in the U.S. The sentiment behind business in the U.S. to always do better than the previous year.
Companies aren’t in business to consolidate for several years. They’re in business to provide more value the following year than they did the previous year.
It’s this type of mentality that’s going to allow SPY stock to surge throughout the coming years and decades.
Did You Know Warren Buffett Loves The S&P 500?
You might know Warren Buffett for being one of the most successful stock pickers of our time. If you follow him you’re quite aware of how much he encourages new retail investors to invest in a growth driven index fund like the S&P 500, or SPY stock (VOO).
In fact, Warren Buffett wants to move 90% of his wealth into the S&P 500 after he’s gone.
The Oracle of Omaha even said he’s instructed the trustee in charge of his estate to invest 90 percent of his money into the S&P 500 for his wife after he dies, Buffett told CNBC’s Becky Quick in an exclusive interview on “Squawk Box”.
WOW! That says a lot about SPY stock coming from Warren Buffett himself. If you think about it, it took Warren so many years of trial and error to figure out his best bet was to simply invest in a long term growth index fund.
This leads me to believe that anything else in the market could very well be played short term to add to this long term retirement vehicle. For instance, I’m heavily invested in the momentum stock, AMC.
I’ve made a tremendous amount of gains (on paper) but don’t plan on cashing out until it squeezes. You can bet I’m parking a ton of cash in SPY stock.
#2. SPY Stock Pays Dividends
The S&P 500 has a dividend yield of 1.25% and an annual dividend of $5.573. A company provides dividends, or a ‘payout’ to it’s shareholders for holding the stock. It’s a little lower now then it has been before (3-5% dividend yield) but this fluctuates. Dividends are not the same as ROI or annual returns.
Investors love dividends because it allows us to either cash in this payout, or reinvest it back into the stock. When you reinvest your dividends back into SPY stock, you begin accumulating fractions of the share which eventually leads to the stock buying another share on its own.
Put enough cash in SPY stock and this snowball can grow quite large over the years. I’ve been personally investing in momentum stocks this entire year so I haven’t updated my SPY stock position just yet.
However, it’s one of my top stock picks for my long term portfolio. Let me know if you own SPY stock in the comment section of the blog below. I’d love to know.
#3. Annual Return of 13.55% In Recent Years
SPY stock has had an amazing return of 13.55% over the past 3 years. Since inception, the S&P 500 has yielded an annual return of approximately 10%.
If you make $5 million dollars from momentum trading, pay your taxes, and put at least $1 million in SPY stock then you could be earning a whopping $100k yearly return.
If you put $2 million and leave yourself with the remaining in your pocket, well then now you’re earning $200k per year and have a cool $1.3 million in your pocket.
This is just an example of how new retail investors can use SPY stock as a long term retirement vehicle that will continue to multiply your profits.
Using this same example, I would personally leave $3 million in SPY stock and leave the $300k in my pocket. Some of this money could go into other stocks or crypto, or even other momentum trades.
The S&P 500 Always Grows
Through the ups and downs, throughout economic downturns and abundance, SPY stock has always grown.
When is the best time to buy the S&P 500? In my opinion, when the stock is on discount. During the COVID pandemic the stock market tanked but the wealthy made a lot of money.
How? Because they took advantage of the fire sale and loaded up on ‘cheap’ stock, or ‘discounted’ stock. As stock price began to rise again, the wealthy began to see profit.
This is how the rich get richer during economic downturns. One thing is certain, SPY stock is safer than picking individual stocks to grow your stock portfolio.
And individual stock may become volatile or may plunge and maybe even go bankrupt. And if a company goes bankrupt, you lose all your money in that company.
SPY stock on the other hand always levels out. If a few companies aren’t performing too well, it can always be balanced or countered by companies that are doing extremely great. This is what makes the index fund such an attractive asset to both novice and experienced investors alike.
Have you shown someone how to invest in stocks?
If you know a family member or a friend who wants to learn how to invest in stocks but hasn’t yet, send them this step by step guide for beginners I created.
It saves you the time from teaching them by walking them step by step on how to open their brokerage account with Vanguard. I inform them on the differences between a REIT, Index Fund, and Stock.
If you liked this article be sure to bookmark it or jot down the information for your future stock picks. You can reach out to me via social media if you have any questions as well.