Personal Investment Chatter

Has anyone ever thought of investing in every single 500 of the companies in S&P500? Let's say you had $5000 I.e. 10 dollars on average in every stock. May not work it the stock price is over $10...

funny
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works at

You mean like an index fund? LOL

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likefunny
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How old are you OP? Genuinely curious

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Btw more than 500 companies in the S&P500

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I just wasted 2 mins reading all this

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So you mean buying an index fund that tracks the s&p..

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No. Just buy any number of index funds that track the S&P.

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RSP is a fund that equally weights the s&p 500, if that’s what you’re getting at

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Exactly

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🤦🏻‍♂️

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It is kind of funny how people just buy an index fund ETF knowing that there are sh!t companies in the in underlying index. However this was historically the cheapest and most efficient way to diversify. In an era of free trades and fractional ownership you could theoretically identify 5,10, 20 or however many stocks that were going to underperform in the future, buy the remaining stocks in the index, and slightly outperform the index/ETF. Still a huge time waste with rebalancing but yeah this thread is already a mess so I’ll throw this out there.

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Ok. Time investment is a legitimate concern. Makes sense for those that may not be active day traders.

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I guess the question is, what are you seeking to accomplish through doing this, OP?

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Hey I think you are speaking about an equal weighted index fund. This is not the likes of spy or voo. It is more like the Guggenheim variety. I think ryt or something like that

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Why would you do that when there is a fund for doing the same. Just your time clicking and buying would be worth more than the expense ratio

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An equal amount of $ in each company? Why would you do this? This would not track the index BTW

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SM1- the idea is to invest in every firm in equal amounts. I'm curious about the end result.

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OP - no one really gave you a real answer. Transaction costs are prohibitively high on a small scale. Robo advisors like betterment will do this for you on a larger scale - they call it direct indexing and will do it for valances of $100k+ - the main benefit over buying a spyder is more efficient tax loss harvesting

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In theory if you bought all of the index components in the same weight as an index fund, you would have a small savings equal to the ETF fee load. In reality this would cost you time or some other fee, so probably not. If your question is whether a market cap weighted index performs better/worse than an equal weighted index - that is easily answerable with empirical data

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The only “question” you asked on your post is: “Has anyone thought of investing in every single 500 companies in S&P500?” I don’t know think this is a hypothetical question since there is no hypothesis posed, and the answer to your question is “yes” given that you’ve thought about it.

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Why would you invest an equal $ amount in the 490th-500th company as the 1st - 10th by market cap? If you do this you’re not actually recreating the relative impact of performance in your company, you’ll be over/underweight companies all over the place.

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You’re more than welcome to, but that’s as arbitrary as investing $1 in the first, and $500 in the last. I’m not debating it could go well for you, but so could any # of arbitrarily set positions.

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Maybe OP doesn’t understand that when you buy an index fund you really are buying a tiny piece of all of the underlying stocks?

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I think OP is generating a lot of discussion and is probably getting a star, or badge, or however this works lol

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likefunny
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You’d spend ~$4 in transaction fees for each transaction x 500 = $2000 ! Tell me again what your logic is ?

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funny
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Been living under a rock D2

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Guys, I'm not looking for a perfect answer. I'm asking a hypothetical question which is a very plausible scenario. You've got to give a rationale as to why or why not. I'm well aware of the index funds.

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All potatoes no meat I see.

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Absolutely have thought of it and in the same manner as the majority of index funds by weighting the various companies by market capitalization. To do it manually would be a pain in the butt. I used to run algos off of Quantopian and live trade with Robinhood. While that would be a viable way (and avoid commissions) they unfortunately disabled live trading a while ago now. The only reason to do it is to not pay expense ratios. That being said expense ratios on index funds are extremely low. These days I just have a Vanguard account that I buy index funds in.

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The first reason is that many people wouldn’t likely have the necessary capital to track the index accurately. If you had plenty of money you can theoretically match the index performance but that is what the fund does - you will save some fee but it’s so low it shouldn’t matter.

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No ^ that’s what the index will do, or an etf which tracks that index will do. So you will closely mirror the returns of the index if you did this

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