What's My Target For S&P500 This Year?

🌟🌟🌟There is optimism in the markets last week with all 3 US indexes notching healthy gains.  One reason for the market optimism stems from the recent FOMC meeting with the interest rates left unchanged.  Jerome Powell, The Feds Chairman is also  reinforcing that interest rate cuts are coming despite the recent hot inflation readings.

Last Thursday was the 4th straight winning session for all 3 indexes with the Dow finishing close to 40,000.

What's My Target For S&P500 This Year?

To answer that question, it is best to look into the past to get a general idea on how the S&P500 Index is tracking.   For the purpose of this exercise I shall use $SPDR S&P 500 ETF Trust(SPY)$  which is the best recognised and is the oldest US ETF.  SPY represents 500 of the best and strongest US stocks.

SPY was started in January 22 1993 and is the largest and most liquid ETF with Assets Under Management of USD 533.45 billion.  Big Financial Institutions and Traders use SPY to trade. 

The Top 10 holdings include 6 of the Magnificent 7 stocks - $Microsoft(MSFT)$  , $Apple(AAPL)$  , Nvidia, $Amazon.com(AMZN)$  , $Meta Platforms, Inc.(META)$  , Google, Berkshire Hathaway, Eli Lilly and Broadcom.

$Tesla Motors(TSLA)$  has been downgraded to Position 11 due to its recent volatility and negative news. 

The Top 10 weightage is 32% of the holdings.

Performance wise SPY is up 1.3% in the past 5 days and 10% year todate.  In 2023 SPY was up 31%.  However if we look back at 5 years performance, SPY is up 83%.  At 10 year mark, SPY is up 174%.  Since inception SPY is up a massive 1086%!

According to Tipranks, 504 Wall Street Analysts' 12 month Target price ranges from a high of USD 665.24 to a low of USD 461.42.  Basing on this, the average target price is USD 564.25, an upside potential of 8%.

Since I am just a small retail investor, the higher the target price, the better it is for me.   But what I know is that SPY has been going up steadily since its inception.  That is why I have invested in $SPDR Portfolio S&P 500 ETF(SPLG)$ which is a mini version of SPY.  Both tracks the S&P500 Index.  The main differences between both of them is the liquidity and the expense ratio.  SPLG's Assets Under Management is USD 33.08 billion versus SPY at USD 533.45 billion.  The expense ratio of SPLG is only 0.02 % versus SPY at 0.09%.

From previous experience I find that I am spared the worry and anguish if I invest in SPLG rather than individual stocks.  Take the example of Tesla which is now down 31% year todate and Apple which is down 7% year todate.  

 The best thing about SPLG is the power and strength of many stocks versus just investing into a few stocks.  There is diversification, less risk, and great value for money.   

The S&P500 only selects stocks that are profitable for at least 4 consecutive quarters, have a market capitalisation of at least USD 8.2 billion, be highly liquid and have a public float of at least 50% of its shares outstanding. 

The S&P500 Index rebalances every 3 months, taking in the best stocks and weeding the non performing ones.  In other words the S&P500 does the heavy lifting for me.  No need to read company reports, no need to worry about non performing stocks.  At only 0.02% expense ratio, SPLG offers phenomenal value for money! 

I am happy with the performance of SPLG as I am currently up 18%.  I have been dollar cost averaging into SPLG over the last few years.  It is a slow and steady progress but a worthewhile one.  For me, it is patience and time in the market that counts.  This way, I enjoy the magic of compounding over time.  Plus I receive dividends every 3 months along the way.  That is my favourite way of investing - Dividends and Capital Growth over the years. 

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