One of the key reasons for the S&P 500's continued winning ways is that

Whitney Tilson knows a thing or two about investing. He followed Warren Buffett for decades, ran a hedge fund, and wrote a variety of newsletters and emails for investors, often focusing on value investing.

I subscribed to one of his emails a few months ago in which he made a point that impressed me because I had never thought about it before. He made a good case for why he validated it.Standard & Poor's 500The indices have been winning. This reason also helps each of us to invest better.

What is the S&P 500 and how did it win?

The S&P 500 Index is a collection of the 500 largest and best companies in the United States. Although there are thousands of publicly traded companies in the U.S., together they account for about 80% of the value of the entire U.S. stock market. Here are some of the recent favorites in the index:

Data source: Slickcharts.comSlickcharts.com.

One of the advantages of Big Pan index funds is that indices such as the S&P 500 tend to outperform non-index mutual funds. For example, according to S&P Dow Jones Indices, over the past 15 years, the S&P 500 has outperformed up to 881 TP3T of Koon & Co. mutual funds (i.e., funds in which the manager actively selects the types of investments and decides when to buy and/or sell them).

Why did the S&P 500 win?

So why is it that the S&P 500 and many index funds that track it tend to outperform those funds where highly paid professionals try to beat it? One common reason is simple: fees. Fees can have a huge impact on long-term returns.

The noodles below are another reason Tilson suggests why the S&P 500 continues to win: it catches winners!

From time to time, indexes such as the S&P 500 and the Dow Jones Industrial Average ("Dow") adjust their holdings by kicking out one or more companies that no longer qualify as carriers and adding others. For example, just last monthSuper Micro Computer(math.) andDeckers Outdoor) joined the Standard & Poor's 500 Index, and theWhirlpool(math.) andZions BancorporationThe total amount of the total is rejected. In total, however, each of these indices does not change much from month to month or year to year (and in most cases the composition of these indices does not change at all). (And in most cases, the composition of these indices does not change at all).

This makes the index very different from many investors. They may invest in companies that they are bullish on, but when those stocks struggle, they often sell. Or they sell when they get a nice gain, like the 50% report, or even double their investment.

However, those who stick with healthy and generally growing companies for years end up with amazing long-term gains after ups and downs and even sharp declines. For example.Netflix There was a dip after the launch of the Qwikster service.

Consider semiconductor giant Nvidia, which has had an amazing decade, with an average annual gain of 701 TP3 T. Along the way, it's down about 311 TP3 T in 2018 and 501 TP3 T in 2022. many investors may have been spooked by the decline and sold off, losing the subsequent gains. The market has been in a state of flux for a long time now.

The great companies tend to change their approach more or less over the course of a few years. Nvidia, for example, went from being a major maker of game chips to specializing in data centers and developing artificial intelligence (AI) technology, and Netflix went from mailing out movies to offering a wider variety of entertainment through streaming, some of which was originally created by Netflix. Investors who have persevered through these changes have been rewarded handsomely. These companies are a big reason why the S&P 500 has had such average, solid returns over the years.

How to Profit from the S&P 500's Winning Formula

So what can investors do with these insights? A lot. First, whether you're investing in mutual funds, ETFs, or other investments, you should always be concerned about fees and seek to avoid high fees in favor of low fees.

You should also start withlong termThe goal is to hold a winning stock. Of course, it's great to have a good stock that you can double. But if the stock is still a good one with solid growth prospects, it will probably double for you again, and again and again. Selling too early can be a costly mistake. Just make sure you keep up with the company's growth and progress to ensure that it continues to perform well and earn your confidence.

If following a large number of stocks sounds like too much work or something you're simply not good at, then consider investing in an index fund likePioneer S&P 500 ETFThey provide market-matching returns over the long term. They provide market-matching returns over the long term and can help you accumulate the capital you need for retirement. Remember, many millionaires have become millionaires by investing over the long term.

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A Big Reason Why the S&P 500 Continues to Rise was originally published by The Motley Fool.