Know Nothing About Picking Stocks? Here’s a Great Strategy You Can Employ

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It’s possible to do well in the stock market without really knowing how to invest. Read on to learn more. [[{“value”:”

I’ve been writing about investing for years. And I’ve also been an investor myself for, well, even longer than I’ve been writing about it. I’m happy to say that at this point, I know a thing or two about picking stocks.

But that wasn’t always the case. It took me a long time to learn how to research stocks and build up a diversified portfolio. So if you’re new to investing, know that gaining the knowledge you need can be a work in progress.

Meanwhile, if you’re starting off with limited knowledge, you may feel lost in the context of building a portfolio. And one thing you definitely do not want to do is add stocks to your brokerage account at random.

The good news, though, is that there’s an easy investing strategy you can employ even if you feel clueless about picking stocks. And it’s one that you can feel comfortable falling back on throughout your entire investing career should that come to be.

Why rack your brain when there’s an easy way out?

Even if you’re knowledgeable about picking stocks, it’s not always easy to make those purchases official. After all, it’s your money and savings on the line.

If you choose a bum stock, you risk losses. That’s a hard thing to come to grips with. That’s why you may want to take the pressure off and rely on a strategy that’s served investors well for years — investing in the broad market.

When we talk about the stock market’s performance, it’s usually measured in terms of how the S&P 500 index is doing. The S&P 500 is an index that’s comprised of the largest publicly traded companies. Funny enough, there are actually more than 500 stocks in the index. At last count, the number was 505. The reason for this discrepancy is that certain companies that are part of the index have different classes of stock issued.

But either way, when you invest in the S&P 500 index, you’re basically investing in the broad stock market. And that means you’re getting instant diversification and exposure to a host of quality companies.

Now, you may be thinking, “Great, so you’re telling me to go out and buy 500 — or 505 — different stocks?” But rest assured, I wouldn’t do that to you.

Thankfully, there’s a much easier way to invest in the S&P 500. It’s called buying shares of an S&P 500 ETF.

ETFs, or exchange-traded funds, allow you to buy a bunch of stocks with a single investment. ETFs aren’t limited to broad indexes like the S&P 500. You could, for example, buy into an ETF that focuses on a specific segment of the market, like a healthcare or energy ETF.

But the appeal of S&P 500 ETFs is that you’re getting such broad diversification that it can potentially lead to more confidence in your portfolio. For example, if you buy shares of an energy ETF and energy stocks tank, your portfolio is likely to lose value. If you buy shares of an S&P 500 ETF and the energy sector tanks, that won’t necessarily constitute the same hit.

How much wealth could an S&P 500 ETF lead to?

The S&P 500’s average annual return over the past 50 years has been 10%. So let’s say you invest $300 a month in an S&P 500 ETF over the next 40 years. If your portfolio gets that same return, you’ll be looking at about $1.6 million. That could easily serve as a nice retirement nest egg.

Of course, you don’t have to stick with S&P 500 ETFs as you grow your stock-picking knowledge. But they’re very much a solid investment to start with. And you may decide to keep shares of an S&P 500 ETF in your portfolio even once you become a stock-picking pro.

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