Here’s how some of the most widely held stocks in the S&P 500 have performed.
|Company and ticker symbol||Performance year to date (percent)|
Data as of April 29, 2022
Should you invest in the hottest stocks?
Investing in individual stocks is difficult. You have to research and analyze the business and industry, as well as understand the dynamics that are driving it all. That’s fine for individuals who have the time, ability and desire to do what it takes to succeed here.
But what if you don’t want to do that amount of work yet enjoy the attractive return of stocks? Well, any investor can participate, even with very little knowledge. It’s easy for an investor of any skill level to purchase a fund based on the S&P 500 Index. The fund owns stakes in all the companies in the index, meaning you own a tiny piece of hundreds of stocks.
That setup also means that your performance will tend to track the performance of the index over time, about 10 percent annually over long periods, even if you’re not researching and analyzing the various stocks within it. By buying this kind of index fund, you’ll get the weighted average of all the holdings, and you’ll outperform most investors, even the pros, over time.
Index funds come in two major variants: exchange-traded funds (ETFs) and mutual funds. Each has some benefits and drawbacks. But either way, you get the ability to track an index and to do so at what is often a relatively low cost, often a few dollars a year for every $10,000 invested.
However, if you’re looking to earn the returns of the index, it’s vital that you hold the index fund through the ups and downs, giving the investment the time to ride out the volatility. Otherwise, you’ll probably end up selling low and buying high, as the index gyrates.
Following the hottest stocks helps you find out what the market likes, but if you’re investing in these individual stocks, you’ll need to research the business and understand what the opportunity is. But a more lucrative way might be to scour through the underperformers and find the businesses that will eventually go back into favor, allowing you to buy low and sell high.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
Read More: Best Stocks For May 2022 | Bankrate