Why I'm Still Bullish on S&P 500 Investing in 2025
When we talk about investing, most of us benchmark our returns against "the market." But what exactly is the market? For most investors worldwide, the market means the S&P 500 - the 500 biggest companies in the US.
I've been investing in the S&P 500 through my ETF of choice for years now, and I've been very happy with the gains. But with all the market volatility and concerns about tech concentration, I wanted to dive deep into whether the S&P 500 is still one of the best choices for investors in 2025.
Whether you're a beginner or more advanced investor looking for a passive investing strategy, this analysis will help you understand why I'm personally still bullish on the S&P 500 long-term and why I'll continue dollar cost averaging into it.
What Makes the S&P 500 So Appealing?
The S&P 500 is an index of the 500 largest US companies. You can't invest directly in the index, but you can invest in ETFs that track it from providers like BlackRock, Vanguard, and State Street.
Here's what caught my attention: the average annual returns over a 10-year period is 12.7%. That's actually higher than the typical 8-10% we usually quote for 30-year periods. Why? The last few years have been a bull market, especially with tech and AI driving major price appreciation.
The beauty of buying an S&P 500 ETF is simple: with one purchase, you own a slice of the 500 largest US companies. And here's the kicker - many of these are global companies. Coca-Cola, Apple, McDonald's operate worldwide, so their international success reflects in their US-listed stock performance.
Current S&P 500 Composition: Tech Takes the Lead
Right now, information technology dominates the S&P 500, and honestly, I like that. Whether you're a fan of tech or not, there's no denying it's the future. I don't see us using less technology in the coming decades.
The current sector breakdown shows:
Information Technology (largest weighting)
Financials
Healthcare
Consumer Discretionary
Communication Services
This is dramatically different from 20-30 years ago when industrials and consumer discretionary had much higher weightings. As IT and finance companies grow bigger, their weighting in the S&P 500 increases because it's market cap weighted.
The top 10 holdings include familiar names: Apple, Microsoft, Nvidia, Amazon, Meta, Alphabet, Berkshire Hathaway, Eli Lilly, Broadcom, and JPMorgan Chase. These change over time as companies rise and fall in value.
Here's something important: the top 10 companies alone make up 33% of the entire index. That's huge concentration, but I'm fine with it. I like doubling down on winners.
The ETF Fee Game Changer
I personally invest in the cheapest S&P 500 ETF I can find with a 0.03% expense ratio. Some competitors charge 0.09%, which might seem small, but let me show you the real impact.
Using a compound interest calculator, here's what happens over 30 years:
Monthly investment: €1,000
Annual increase: 5%
Expected return: 9%
Time period: 30 years
The difference between 0.03% and 0.09% fees? Almost €30,000 over 30 years. That's money staying in your pocket instead of going to the ETF provider. You can run your own numbers here.
I choose physically replicating ETFs that actually buy the underlying assets. Mine is distributing rather than accumulating because I'm based in the UAE and don't pay dividend tax, only US withholding tax. The quarterly dividends aren't huge, but I like getting paid and then reinvesting.
S&P 500 vs All World ETFs: The Performance Reality
Many people prefer globally diversified ETFs like the Vanguard FTSE All World. I understand the appeal - you get exposure to almost 3,600 companies from around the world, with the US making up about 60%.
But let's look at the numbers. Over the maximum period available (about 13 years), the All World ETF increased by 317% - which is amazing and much better than keeping money in the bank. However, my S&P 500 ETF returned 517% over the same period. That's almost double the return.
Even over 5 years, the S&P 500 outperformed by almost 20% (100% vs 80% returns). Plus, the All World ETF has a higher expense ratio of 0.22% compared to my 0.03%.
I'm not saying global diversification is wrong - it's a great strategy. I just prefer the lower fees and historically superior returns of the S&P 500. If the macroeconomic landscape shifts dramatically against my US market thesis, I'll reconsider. But right now, I don't see it happening.
The Power of Dividend Reinvestment
The current dividend yield is 1.12%, which doesn't sound like much. I get a couple hundred from dividends annually, but here's where it gets interesting.
Over a 10-year period, the S&P 500's price return (just share price appreciation) was 193%. But when you factor in reinvested dividends, the total return jumps to 250%. That seemingly small 1% dividend reinvested over time makes a major difference.
This is why I'm a big fan of reinvesting dividends. If you don't want to manually reinvest, consider an accumulating ETF that does it automatically for you.
Why I'm Still Bullish Long-Term
US Innovation Leadership
Whether you like it politically or not, the US still leads in innovation, AI, and technology. These are mostly US-driven companies with their only real competitor being China, which I find trickier to invest in due to transparency concerns.
Global Reach
These aren't just American companies operating locally. Apple, McDonald's, Nvidia are globally available companies that people worldwide need and use.
Simplicity and Low Cost
As I've shown, the fee structure is significantly better than global alternatives, and historically the returns have been superior.
US Dollar Strength
Even if the dollar changes in the future (maybe to a digital currency), I'm not investing in the currency but in the underlying businesses that generate revenue and profits.
Addressing Common Concerns
"It's too concentrated in tech"
Yes, but if you think the future involves less technology than today, you should probably find a different investment. I'm doubling down on tech because I believe it's the future.
"All-time highs mean it's a bubble"
All-time highs will keep happening - that's how stocks increase over decades. The S&P 500 has survived two world wars and continues growing. Otherwise, why would anyone invest?
"Shouldn't I just buy an All World ETF?"
Absolutely you can! It's a great option with more diversification. But historically, the performance hasn't been quite there, and you'll pay more in fees.
How to Start Investing in the S&P 500
It's actually extremely simple:
Choose a low-cost broker - I personally use Interactive Brokers, Trading 212 (get up to €100 welcome bonus), and eToro for different purposes. For beginners, I'd recommend Trading 212 for its simplicity and commission-free trades.
Select the right ETF - I use SPY5, but you can choose different currencies and exchanges based on your location.
Set up dollar cost averaging - Automate your investments weekly or monthly. Make it as automatic as brushing your teeth.
The key is staying consistent. That 12.7% return over 10 years assumes you were invested the whole time. If you invest sporadically, your returns will be significantly lower.
My Personal Strategy Going Forward
I continue dollar cost averaging into the S&P 500 every week because I don't know if today's price is good or if it'll drop tomorrow. Nobody does. That's why consistent investing beats trying to time the market.
I'm also investing in the NASDAQ 100 for even more tech exposure because I'm that bullish on technology's future. Some might call it risky concentration, but I call it conviction investing.
The beauty of using multiple brokers is that if one platform is down, I can still trade on another. It's all about having backup plans.
FAQ
Q: Is the S&P 500 suitable for beginners?
A: Absolutely. It's one of the best starting points for new investors because you get instant diversification across 500 large companies with a single purchase.
Q: How much should I invest monthly in the S&P 500?
A: Start with whatever you can afford consistently. Whether it's €50 or €500 monthly, consistency matters more than the amount. You can always increase as your income grows.
Q: Should I choose accumulating or distributing ETFs?
A: It depends on your tax situation and preferences. Accumulating ETFs reinvest dividends automatically, while distributing ETFs pay them out. I prefer distributing because of my UAE tax situation.
Q: What's the minimum investment needed?
A: With fractional shares on platforms like Trading 212, you can start with as little as €1. There's no excuse not to begin.
Q: How often should I invest?
A: I invest weekly, but monthly works great too. The key is consistency and automation. Set it up once and let it run.
Q: Is now a good time to start investing in the S&P 500?
A: The best time to start investing was yesterday; the second best time is today. Don't try to time the market - time in the market beats timing the market.
Q: What if the US market crashes?
A: Market crashes are normal and expected. The S&P 500 has recovered from every crash in history. That's why you dollar cost average and invest for the long term.
Risk Disclaimer: Investing in the stock market carries inherent risks, including the potential loss of principal. Past performance does not guarantee future results. The S&P 500 can be volatile, and you should only invest money you can afford to lose. Consider your risk tolerance and investment timeline before investing. This content is for educational purposes only and not personalized financial advice.
Remember, building wealth through investing requires patience, consistency, and a long-term mindset. The compound interest effect is powerful, but it needs time to work its magic.
Whether you choose the S&P 500 or prefer more global diversification, the most important step is to start. Pick a strategy, stick with it, and let time and compound growth do the heavy lifting.
Is the S&P 500 Still the Best ETF in 2025?
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