90% of My Money Is In This S&P 500 Fund. Here’s Why

I have a good amount of money invested for my retirement. Almost all of it — somewhere around 90% — is invested in one single asset. It’s the SPDR S&P 500 ETF Trust (SPY -0.32%)

It may seem crazy to have so much of my portfolio in just one ETF. But there are a few very good reasons why this makes sense for me — and it may make sense for you, too.

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Consistent returns

The SPDR S&P 500 Trust is an exchange-traded fund that aims to track the performance of the S&P 500, consisting of around 500 large U.S. enterprises. The companies included have been chosen to represent the broader economy, and the index is market-cap weighted, so the biggest ones have the greatest weight and the most influence over how the index performs (which is a good thing, since the largest stocks often perform the best).

The S&P 500 is a widely used benchmark used to express how the broader stock market is doing, so investing in it is basically like making a big bet on a diverse array of large companies across different industries.

Unsurprisingly, this is usually a winning bet. In fact, the S&P 500 index consistently produces 10% average annual returns over the long haul. Funds like the SPDR S&P 500 Trust that mimic its performance tend to do about the same.

I’m leaving my money alone for decades, because it’s earmarked for my retirement, so I expect I’ll earn something close to that 10% average annual return over time. This makes it easy for me to set my investing goals and have strong confidence I’ll be able to achieve them.

No investing knowledge required

There’s another reason why most of my money is in the SPDR S&P 500 Trust. I did not have to have any specialized investing knowledge to select it.

Basically, I knew years ago that I wanted to put my money into an ETF that tracked the performance of the S&P 500. I searched on Google and used my brokerage firm’s fund screener, found the SPDR S&P 500 Trust within minutes, and was able to buy it.

I didn’t have to pore over earnings reports or analyze company leadership or market position. I don’t have to keep track of how any companies are doing. I don’t have to think about it. I just auto-invest my money in my fund and wait for it to grow over time.

Now, I am giving up the potential to earn higher returns, which could come from making knowledgeable, informed choices to invest in shares of individual stocks. But I don’t have enough time or interest to find those investments that could outperform the S&P — especially when even professional fund managers often struggle to do that well.

Instant diversification

Since the S&P 500 includes companies across all different industries, my portfolio is basically diversified with this single investment.

The only other thing I need to do is put a little bit of money into bonds so I’m not overinvested in the stock market. Beyond that, I know I have a good mix of businesses I indirectly own through my ownership of the SPDR S&P 500 Trust.

Low fees

Finally, the SPDR S&P 500 Trust charges an expense ratio of 0.09%. That is an extremely low expense ratio, so I won’t lose my returns as a result of high fees.

For all of these reasons, it just makes sense for me to be invested heavily in this S&P 500 ETF. If you’re looking for an effortless investment that produces consistently great returns with minimal risk, your money may belong in it as well.