What should (my) first investment be?

The first investment

Still not investing in the stock market? You’re too late, but it’s still possible. New investors should consider this their first investment. It’s time!

Leaving your money idle in your bank account or saving money and investing in Fixed Deposits, Savings Certificates and other ridiculous savings products won’t save you. Losers do that and the results are there. It will just postpone your financial problem until a few months later. The world has changed and you don’t want to keep using old methods to combat future problems. That’s the reality and you have to accept it.

Take the first financial step today that will have a positive impact on (your) future!

Start taking the first financial step today. If you haven’t taken that step yet, you’re making a serious mistake that will have a big impact financially over the next few years in your life, but not only. Also on the next generations, if you have or are thinking of having children, grandchildren and great-grandchildren. You have to decide now, not in a year or two. For every year you put it off, the problem grows even bigger.

The First Investment New Investors Should Consider

Fortunately, the coronavirus pandemic has been brought under control and we’re living without restrictions again. But have you ever thought about what it would have been like if you had invested before the pandemic, to help in this more difficult situation. Or even how you could have helped the people closest to you.

Although money isn’t the solution to every problem, having more money will certainly make a difference.

Be realistic!

It seems like it never happened or it was a big nightmare, but the 👾 coronavirus pandemic was very real and created a lot of collateral damage, one of which was 🚀 high inflation, which even today is not fully under control (as they say) and continues to claim victims.

Anyone who doesn’t invest or put all their money in financial products such as Savings Certificates, Term Deposits and other similar products is making a big mistake.

Although the interest rates on these financial products have risen, they are still a handout that will make you miss out on opportunities.

Not only will your money 💵 never grow above inflation, but neither will your salary.

In other words, you have a double problem:

your savings are losing value every day
and your salary is becoming too small for your monthly expenses.
So the only way to deal with inflation is to invest and… the first investment everyone should consider making is the… S&P500 index.

📈 Why Invest in the S&P500 Index

Reasons to invest in the S&P500 index
The S&P500 index is the shareholder index that brings together the 500 largest companies listed on the US stock exchanges 🇺🇸, the NYSE and NASDAQ. If it all sounds like Greek to you, these are the two most important stock exchanges in the world and the main companies are listed here.

The S&P500 index is a benchmark, it’s been around for decades and is often used as a comparison with other investments. Many investors use this long-term strategy and the results are clear to see. It’s an investment that everyone should consider.

In my opinion, it’s a must-have!

The S&P500 is made up of 500 companies, and these are the 10 largest positions today:

Microsoft Corporation (NASDAQ:MSFT)
Apple Inc. (NASDAQ:AAPL)
NVIDIA Corporation (NASDAQ:NVDA)
Amazon.com, Inc. (NASDAQ:AMZN)
Alphabet Inc. Class A (NASDAQ:GOOGL)
Meta Platforms, Inc. (NASDAQ:META)
Alphabet Inc. Class B (NASDAQ:GOOG)
Berkshire Hathaway Inc. (NYSE:BRK-B)
Eli Lilly and Company (NYSE:LLY)
Broadcom Inc. (NASDAQ:AVGO)

Not only do many investors use the S&P500 index as a way of growing their savings to protect themselves against inflation, but they also use it to create a supplement for retirement or to be prepared for unforeseen expenses, not to mention that some PPRs (Retirement Savings Plans) use this strategy, because decades of historical data show that it is a long-term passive investment strategy that should be taken into account.

The graph below of the S&P500’s performance from 1996 to 2024 shows its potential.

Performance of the S&P500 index since 1995
If you’re thinking of investing in a PPR that replicates the S&P500, you should consider forgetting about it. They’ll never be able to beat the performance of the S&P500, even if they use the strategy, because the commissions they charge their clients are enormous, killing their long-term gains. The only advantage of PPRs are the IRS tax benefits, otherwise they can’t beat the market.

Although past gains are no guarantee of future returns, the performance of the investment strategy in the S&P500 index has generated positive results for investors over the long term.

There will be negative years, of course, but the performance of the last few decades shows that despite losses, in the following years the losses were cancelled out by the gains made.

How to invest in the S&P500 index?
Companies in the S&P500 index
More and more people are interested in investing in the S&P500 because they have realised its potential, and that’s good news. It only takes a small decision to have big effects in the future and many investors use this long-term strategy because they realise its potential.

To invest in the S&P500 index you can’t invest directly, you have to choose an ETF that replicates the performance of the index, but if you’ve ever tried to learn about it, you’ll have noticed that there are dozens of ETFs that replicate the S&P500.

It’s time to simplify everything.

Before revealing which are the most popular S&P500 ETFs, it’s important to mention that there are two types of S&P500 ETFs:

Accumulative ETFs
and Distributive ETFs.
I prefer accumulative ETFs, but your choice should be based on your long-term goals. The advantage is that you have two options available. It’s up to you!

Types of S&P500 ETFs
Accumulative ETFs, as the name suggests, accumulate the dividends received by the companies that are part of the index, growing the position. In other words, by investing in an accumulative ETF, the investor will not receive dividends, but they will be accumulated in the position, which can be very advantageous in tax terms, because you don’t have to declare dividends and when you sell the position many years from now, if the capital gains tax is lower when you close positions with 2 years, 3 years or more, you will pay less tax.

Currently the tax on gains is 28 per cent!

With distributive ETFs, dividends are distributed to investors. This can be ideal for investors who want to build up a large position in the S&P500, but at the same time want to receive dividends to invest in other ETFs and shares or use in another way. In tax terms, the difference with accumulative ETFs is that dividends have to be declared each year in the following year’s tax return.

Now that you know what two types of ETFs there are, it’s time to find out which S&P500 ETFs are available to investors.

I previously published the article Which S&P500 ETF should I choose? No two are the same. The table below shows the various S&P500 ETFs available.

To be exposed to the performance of the S&P500, these are the ETFs available:

Symbol Name ETF Stock Exchange Type of ETF Currency Commission Management

Table 1. ETFs that replicate the S&P500 index, which are available to investors in Europe. Only $SPY is not available to European investors.

From the table of ETFs presented above, the most popular choices among investors are:

VUAA (Vanguard S&P 500 UCITS ETF Acc EUR) [accumulative ETF]

and VUSA (Vanguard S&P 500 UCITS ETF Dist EUR) [distributive ETF].

This is not only because both ETFs are managed by Vanguard, which is the world’s largest investment fund manager and the second largest ETF provider behind iShares, which is owned by Blackrock, but also because the price per unit is very affordable.
It’s ideal for investors who want to:

Buy everything at once (Lump Sum)

or make monthly, quarterly or other frequent top-ups (DCA).
Although it is possible to buy fractions of the ETFs in the table above at most brokers, you should consider buying only whole units, i.e. 1 unit, 2, 3, etc.

How do I buy my first S&P500 ETF?

To invest in an S&P500 ETF you need to open an account with a broker, you have plenty of them :

Now it’s time to start your financial journey. Analyse and make your decision!