However, some people are anxious that this trend cannot go on much longer and that we are over due for a correction. While it is impossible to predict what is next, it is safe to say prices will eventually fall sooner or later.
When the market gets hit with a downturn, it is vital to be ready. Although nothing is completely safe, there is one investment better than any other at withstanding crashes.
Market crash preparation
Stock crashes are unavoidable, so your investments will eventually take a huge hit at some point. Also, timing your investment in an attempt to avoid downturns is very risky, and it is a strategy that’s almost impossible to get right.
Since no one can escape a crash, the best thing to do is find investments that can recover from downturns.
This can be hard, and requires research to find out if a company’s numbers will withstand market turbulence.
The perfect investment (if there were one)
One investment that reigns supreme when it comes to surviving market crashes, is the S&P 500 index fund. The S&P 500 is a market index that is linked to the entire market. Although it’s not totally unaffected by downturns, it has an amazing record of surviving every crash it has ever seen.
In the past 20 years alone, the S&P 500 has experienced the dot-com bubble, 9-11, the Great Recession, and now a global pandemic. But it has continued earning returns over the years.
By putting your money into S&P 500 index funds, it is extremely likely you will earn good returns over years — even if we have a crash in the short term.
S&P 500 index funds are among the safest investments possible. You might see your investments go down during times of volatility, but there is a great chance they will recuperate their value over time.
Although these funds are not 100% safe, you can make great money if you are patient. You need time to see larger returns, but this is well worth the wait.
The S&P 500 has gained 10% yearly, on average, since its start. So, if you are investing $300 a month in a S&P 500 index fund, and you are making a 10% return, here’s around how much you would have over time:
Years — Total Investment
5 — $22,000
10 — $57,000
20 — $206,000
30 — $592,000
40 — $1,593,000
Given time, it is possible to earn millions just by using S&P 500 index funds wisely. The trick is to save a lot and start early.
Where to go?
The following S&P 500 index funds are all great choices for starting index investing:
- SPDR S&P 500 ETF Trust (NYSEMKT:SPY)
- iShares Core S&P 500 ETF (NYSEMKT:IVV)
- Vanguard S&P 500 ETF (NYSEMKT:VOO)
All of these follow the S&P 500, and they all have low fees too. Making them a great investment. Market crashes are unavoidable, so be prepared. Use S&P 500 index funds and sleep easier knowing your money is safer.
Author: Steven Sinclaire