Data as of June 30, 2022

Should you invest in the hottest stocks?

Investing in individual stocks is difficult. You need to research and analyze the company and the industry, as well as understand the dynamics that drive it all. It’s great for people who have the time, ability, and desire to do what it takes to succeed here.

But what if you don’t want to put in so much work while enjoying attractive stock returns? Well, any investor can participate, even with very little knowledge. It’s easy for an investor of any skill level to buy a fund based on the S&P 500 index. of shares.

This setup also means that your performance will tend to follow the performance of the index over time, around 10% per year over long periods, even if you don’t research and analyze the different stocks in it. . Buying this type of index fund will give you the weighted average of all holdings and outperform most investors, even pros, over time.

Index funds come in two main varieties: exchange-traded funds (ETFs) and mutual funds. Each has advantages and disadvantages. But either way, you have the ability to track an index and do so at often a relatively low cost, often a few dollars a year for every $10,000 invested.

However, if you are looking to achieve the returns of the index, it is essential that you hold the index fund during the highs and lows, giving the investment time to weather the volatility. Otherwise, you’ll likely end up selling low and buying high, as the index swings.

At the end of the line

Tracking the hottest stocks helps you find out what the market likes, but if you’re investing in these individual stocks, you’ll need to research the company and understand what the opportunity is. But a more lucrative way might be to scour the underperformers and find the companies that will eventually turn favorable again, allowing you to buy low and sell high.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are cautioned that past performance of investment products does not guarantee future price appreciation.