Some of the Best Plays for Risk Adverse Investors Now

Some of the Best Plays for Risk Adverse Investors Now

Some of the Best Plays for Risk Adverse Investors Now


Many investors do not want to take any non-market risk in specific stocks or even in specific sectors. That leads them into the S&P 500 mutual funds or ETFs.

The Big Q: What S&P 500 Index fund is the best?

 Below is a list of “the best”, as follows:

The 3 major funds/ETFs that track the S&P 500 all have low fees that are less than 0.1%. Index-trackers will tells us that fee minimization will influence our returns more than anything else over time.

The S&P 500 is large enough that it gives a full spectrum of sectors, some of which are growth and some of which are value, aka Aristocrats.

It also comes with a dividend yield of about 2.4%, even when you take into consideration that 80 members of the S&P 500 pay no dividends at all.

The absolute lows when the S&P 500 hit 666 on 9 March 2009 means that the S&P 500 has risen about 240% since the bottom of the market.

The Vanguard 500 Index Fund Admiral Shares (VFIAX) is said to be the industry’s 1st index fund for individual investors. Its minimum investment size for this class of shares is $10,000. This 500 Index Fund comes with an expense ratio of just 0.05%. To put that in context, a $1-M fund balance would see fees of just $500 per year. The Vanguard S&P 500 fund’s total net assets were $292.4-B as of 31 January 2017.

The Fidelity 500 Index Fund (FUSEX) has a $2,500 minimum investment and it comes with an expense ratio of 0.09%. That would mean that a $1-M position would pay $900 in annual fees. The Fidelity version of the S&P 500 fund had $111.4-B in assets as of 31 January 2017.

The SPDR S&P 500 ETF Trust (NYSEArca:SPY) is the Key exchange-traded fund which tracks the price and yield performance of the S&P 500Index. Its annual gross expense ratio is 0.0945%, or a $1-M balance would cost $945 in annual fees. This ETF had $231.8-B in assets as of 21 February 2017, and this is the most liquid of all major ETFs with 77-M shares in average daily volume.

As ETFs are bought during the day just like a stock, investors need to watch out for commission fees paid to their brokerage firm on top of the management fees.

The 11 S&P 500 Index sectors are as follows: Consumer Cyclicals; Telecommunications Services; Industrials; Consumer Non-Cyclicals; Financials; Healthcare; Information Technology; Utilities; Materials; and Energy.

The Top 10 components accounted for 18.14% of the entire index weighting: Apple; Microsoft; Exxon Mobil; Johnson & Johnson; Berkshire Hathaway; J.P. Morgan Chase; Amazon; General Electric; Facebook; and AT&T.

Another issue which matters about just these three S&P 500 Index funds is that they have a combined value of more than $635-B.

When a fee is down to under 0.1%, the reality is that it just does not make a difference to most investors. Most investors do not have $1-M in any single fund, so the difference here over management fees is probably going to boil down to what other research and information they get out of each fund management group.

At the end of January, S&P sent HeffX-LTN some data showing that the S&P’s 2016 P/E ratio was 19.4, but that number was a 17.4 P/E ratio based upon expected  Y 2017 earnings per share.

S&P’s latest month-end data showed that there is over $7.8-T benchmarked to the S&P 500 Index, and the actual index assets were about $2.2-T in total.

So just these 3 Top funds and ETFs are close to 33% of the entire S&P 500 Index tracking values. They might even be more if you include the crossovers.

Wednesday’s closing bell for the S&P 500 was 2,362.82 (-2.56). That is just the 2nd day down of the last 10 trading sessions.


Remember, what I say, it is your money, so it is your responsibility to determine your Risk tolerance.

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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