The S&P 500 is an index of large U.S. companies selected under the index provider’s rules. Buying a fund that tracks the S&P 500 is not the same as buying the index itself, and it does not guarantee that you will avoid losses. The linked video imagines a severe market decline, but does not establish the probability of such an event or the return of gold.
How Is an Index Different from a Fund?
An index is a way of measuring and tracking a group of securities. A fund or exchange-traded fund (ETF) is a product that seeks to track an index using its own method. Funds can differ in fees, replication method, currency exposure, tax treatment, liquidity and tracking error. Read the prospectus and key information document for the specific product you are considering.
Risks to Consider
- Market risk: Stock prices and fund values can fall.
- Concentration: Having many companies in an index does not mean your investment is diversified across every country or asset class.
- Currency: Investors whose expenses are in Thai baht may be affected by exchange-rate movements.
- Fund differences: Fees, tracking methods, taxes and trading access affect actual outcomes.
Before deciding, consider your investment horizon, money you may need along the way and the loss you could tolerate. Compare with other asset classes in light of your goals. Do not treat a hypothetical scenario in a video or past performance as a promise of future results.
References
- S&P Dow Jones Indices: S&P 500 methodology and information
- Investor.gov: Index funds and ETFs
- Investor.gov: Asset allocation and diversification
Source: Original video