The simplest investment is the most profitable! This year, 3/4 of ETFs cannot outperform the S&P 500

A simple investment strategy turns out to be the most stable wealth code this year? That's buying the S&P 500 index fund.

Driven by tech giants like Nvidia, the S&P 500 index has already hit 31 historical highs this year, rising in eight out of the past nine weeks, accumulating a gain of about 15% so far, and it's only June.

According to Athanasios Psarofagis, an ETF analyst at Bloomberg Intelligence, only 23% of stock ETFs have outperformed the S&P 500 index this year, such as most actively managed ETFs, quantitatively driven smart betas, and thematic investment ETFs, all of which are inferior to the S&P 500.

Although Wall Street fund managers have been pouring a large amount of capital into various complex diversified strategies, the undeniable fact is that the ordinary S&P 500 index has outperformed 3/4 of ETFs this year.

Julian Emanuel, Chief Equity Strategist at Evercore ISI, said, "In a low volatility, high return environment like 2024, investors should stick to basic strategies - buying simple index funds and actively managed mutual funds with a good alpha record, there is no need for complex strategies. Simple is beautiful."

Investing guru Warren Buffett has also said that ordinary investors should buy index funds for the long term, rather than following other people's stock picking advice. Buffett said, "For most people, the best way is to buy S&P 500 index funds. People spend a lot of money on investment advice, which is actually unnecessary. If you bet on the U.S. stock market and maintain this position unchanged for decades, the returns will be much better than buying U.S. Treasury bonds, or listening to investment experts."

While the S&P 500 is good, risks should also be noted

Despite the continuous record highs of indices like the S&P 500 and Nasdaq, making faithful investors who "buy and hold" earn a lot, there is a hidden danger behind the "top-heavy" rise of the S&P 500 index, which is that the major gains come from a few individual stocks. For example, one stock like Nvidia has contributed to over 30% of the index's gains this year.

After briefly becoming the world's largest company earlier this week, Nvidia fell for two consecutive trading days, with a cumulative market value evaporating over $220 billion, which also dragged down the performance of the S&P 500 index in the last two trading days.

Micheal O'Rourke, Chief Market Strategist at Jonestrading, said, "As we enter the second half of the year, diversification and risk reduction are the right action strategies. Investors should not expect Nvidia to continue to be the sole driver of the S&P 500 index."