Invest in the S&P 500 – Where Winners Grow (and Losers Get Booted)

Just the Tip:

The S&P 500 is built to automatically ride winners and cut losers. When companies grow, you own more of them. When they shrink, you own less. And when they really tank? They’re kicked out entirely. If you want in on this money machine, all you need to do is buy a low-cost S&P 500 index fund or ETF. And then just keep buying – especially during market dips. It’s that simple.

Think the S&P 500 is just a boring basket of America’s biggest companies? Think again. This index is actually more cutthroat than a Silicon Valley startup competition.

Here’s the genius part most investors miss: When companies grow, they automatically become a bigger slice of the index. Did Apple crush their earnings report? You own more AAPL. Did Microsoft double? You just doubled your MSFT exposure. Meanwhile, companies that start struggling get their ownership slashed – and the real losers get booted entirely. There are only 500 spots after all.

Let’s get more specific: In 2017, Tesla wasn’t even in the index. Today, TSLA is a top-10 holding. Meanwhile, General Electric (GE), once America’s most valuable company, got kicked to the curb. Same with Blockbuster (BBI – remember them?). The index didn’t debate, discuss, or call its therapist – it just made the switch.

This auto-pilot winner-riding system has powered the S&P to a 160% gain from 2017 to 2024. That’s why Warren Buffett tells everyone to “consistently buy an S&P 500 low-cost index fund. Keep buying it through thick and thin and especially through thin.”

The kicker? While many hedge funds charge a 2% management fee plus 20% of profits to pick stocks, you can get this ruthlessly efficient money-making machine for about 0.05% or less annually. That’s like paying $5/year to manage every $10,000 in funds.

Remember: Markets change, trends shift, but winners tend to keep winning. The S&P 500 just makes sure you’re always betting on the horses currently winning the race.

Speaking of race, check out this bar chart race video. It’s like a 34-year time-lapse of the S&P 500’s biggest companies by market cap. It’s really interesting to see the top players rise and fall over time.