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Since its beginnings in 1957, the S&P 500 —comprising the 500 largest U.S. companies by market capitalization—has delivered strong returns while helping shareholders effectively diversify their portfolios.
If someone had invested £30,000 10 years ago, how much would they have now?
Strong returns
Since December 9, 2014, the S&P 500 has risen an impressive 196% in value. That equates to an average annual return of 11.4%.
But that doesn't include dividends paid during this time. Including payments to shareholders, the index's average annual return rises to an impressive 13.7%.
To put this in context, the average annual returns (including dividends) of the FTSE 100 and FTSE 250 They are far behind, just above and below 6%, respectively.
So how much would the S&P 500's strong performance have contributed in terms of cash? If someone had invested £30,000 in an S&P 500 index fund at the end of 2014, they could now (with dividends reinvested) accumulate a whopping £117,148.
<h2 class="wp-block-heading" id="h-tech-focus”>Technological focus
The largest companies in the US index are technology companies, a sector that is not well represented in the UK. And I think these tech giants will continue to drive the S&P 500 higher.
The value of these companies has skyrocketed amid investor rumors about the evolution of the digital landscape. More recently, market enthusiasm for artificial intelligence (ai), helped by strong commercial updates from NVIDIA, Alphabetand microsoft – have boosted demand for its shares.
But ai is not the only game in town. There are many other tech growth segments that could boost the S&P in the long term, including:
• Cloud computing
• Green technology (including renewable energy and electric cars)
• Robotics
• Cybersecurity
• Quantum computing
• The Internet of Things (IoT)
• Autonomous vehicles
A Top Stock I'm Considering
To capitalize on these themes, I added a couple of US exchange-traded funds (ETFs) to my portfolio.
one is the widest HSBC S&P 500 ETFgiving me exposure to the entire index. The other is the iShares S&P 500 Information technology Sector ETF, which gives me more targeted access to tech stocks.
Having achieved my diversification goal, I also look to increase my returns by buying some individual stocks. Dell Technologies (NYSE:DELL) is a US stock I'm considering today.
Like Nvidia, the company is also betting big on the ai revolution. But so far it hasn't enjoyed the same spectacular results, so it doesn't have the same sky-high rating as its tech rival.
Dell's forward price-to-earnings (P/E) ratio is 15.8 times. That's quite low compared to the broader technology sector and well below Nvidia's massive ratio of 47.1 times.
It may not yet be achieving the same spectacular results as Nvidia, but it has made significant strides in ai.
Between September 2023 and June, it sold an impressive $3 billion worth of ai servers. And it reached a major milestone in November by selling Blackwell server racks, the first to use liquid cooling technology. This could be a game-changer in energy efficiency and server performance.
Although Dell faces substantial competition in the ai space, I think it's an attractive stock for me given its encouraging recent progress, and especially at current prices.
