1 investment that I add to when the market crashes

1 investment that I add to when the market crashes

The stock market has been on a wild ride so far this year. That Nasdaq officially entered bear market territory, down more than 25% year-to-date S&P500 has also fallen by around 16% over this period.

While this downturn could be a sign that a full-blown crash is imminent, no one knows for sure what the future holds for the market. Even the experts cannot predict exactly how the market will develop in the near future and whether we will see a crash is unclear.

However, market downturns can be a wise time to invest more as prices are significantly lower. If the market crashes in the future, there’s one investment I’ll load up on: an S&P 500 ETF.

Young woman sitting at a desk and looking at a laptop.

Image source: Getty Images.

What is an S&P 500 ETF?

An exchange-traded fund (ETF) is a form of investment that includes multiple stocks in a single fund. An S&P 500 ETF tracks its namesake index, which means it includes all stocks within the index itself and aims to reflect its performance.

Because it’s impossible to invest directly in the S&P 500 Index, investing in an S&P 500 ETF comes closest.

The main reason I intend to charge onto these types of investments is that they have a high probability of recovering from a market downturn. The index itself has seen dozens of corrections, crashes, and bear markets over the decades, and it’s always managed to recover — no matter how severe those downturns were or how long they lasted.

^SPX chart

^SPX data from YCharts

In addition, the S&P 500 itself includes stocks from 500 of the largest and strongest organizations in the US Amazon, Apple, alphabetand Tesla make up the index, and if any stocks are likely to survive a downturn, it’s those in the S&P 500.

Should you invest in an S&P 500 ETF?

This type of investment can be a good option for many investors. Not only is an S&P 500 ETF highly likely to recover from market volatility, but it’s also an easy, no-fuss investment.

With an ETF, you automatically invest in all stocks within the fund. That means you never have to worry about picking individual stocks or deciding whether to sell certain investments. All you have to do is invest in the ETF and it will do all the work for you.

For some investors, however, the practical nature of S&P 500 ETFs can be a downside. If you prefer to have more control over your portfolio, this type of investment may not be the best choice.

Also, by their very nature, S&P 500 ETFs can only deliver average returns. They are designed for it Follow the market, making it impossible for them beat the market. For many investors, the relative safety of this form of investment outweighs the average returns. But if your primary goal is to beat the market, you might be better off investing in individual stocks.

The stock market might be shaky right now, but downturns can be one of the best times to invest because you’re buying at a deep discount. S&P 500 ETFs may not be for everyone, but they could be a smart option for you.

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