Last Friday,—— 'Triple Witching Day' ，the U.S. exchanges saw a turnover of 18 billion shares, a 55% increase from the average of the past three months. The S&P 500 index's end-of-day trading volume surged by 30% compared to the daily average, with the overall index experiencing a slight pullback. So far this year, driven by the AI craze, the S&P 500 index has set a record 31 times, with tech giants like Nvidia's advanced heat causing the S&P 500 to rise by 15% since the beginning of the year, and this year has just passed half.

Is complex stock selection worse than simply buying index funds?

According to Athanasios Psarofagis, an ETF analyst at Bloomberg Intelligence, only 23% of stock ETFs have outperformed the S&P 500 this year, with most actively managed ETFs, quantitatively driven smart beta, and thematic investment ETFs all falling short of the S&P 500.

This reminds us of a quote from the 'Stock God' Warren Buffett, who said: "Although Wall Street's major fund managers have been investing a lot of money in various complex diversification strategies, they cannot ignore the fact that the ordinary S&P 500 index has outperformed 3/4 of ETFs this year." In his view, ordinary investors should buy index funds for the long term, rather than follow others' stock selection advice.

Julian Emanuel, Chief Equity Strategist at Evercore ISI, said: "In a low-volatility, high-return environment like 2024, investors should stick to basic strategies - buying simple index funds and actively managed mutual funds with a good alpha record, there is no need for complex strategies. Simplicity is beauty."

What is the difference between the S&P 500 and ETFs?

ETF: It is an investment fund traded on the stock exchange, which tracks the performance of a specific index and allows investors to buy and sell these fund shares like stocks. ETFs can track various asset classes and indices, such as stock indices, bond indices, commodity indices, etc., and investors can freely choose different ETF products to build their own investment portfolio to achieve asset diversification and risk management.

S&P 500 Index: It is a stock market index created by Standard & Poor's, including the stocks of 500 large U.S. listed companies, and is one of the important indicators to measure the performance of the U.S. stock market. Investors cannot directly buy the index, but they can indirectly invest by purchasing ETF funds that track this index. Although Wall Street's major fund managers have been investing a lot of money in various complex diversified portfolio strategies of ETFs, they cannot ignore the fact that the ordinary S&P 500 index has outperformed 3/4 of ETFs this year.

Large-cap tech stocks are cooling down, and investing in the S&P 500 should be cautious.

Despite the S&P 500 index repeatedly hitting new highs, making those investors who adhere to the "buy and hold" strategy full of profit, there is a risk behind the rise of the S&P 500 index: the main increase is concentrated in a few large stocks, such as Nvidia, which has contributed more than 30% to the index's rise this year. Last week, Nvidia once became the world's most valuable company, but fell continuously in the last two trading days, with a cumulative market value of more than 220 billion U.S. dollars, which also dragged down the performance of the S&P 500 index in the last two trading days. Currently, Nvidia's stock price has plummeted nearly 13%, and the market value has evaporated 430 billion U.S. dollars.

Source: uSMART SG

Michael O'Rourke, Chief Market Strategist at Jonestrading, said: "Entering the second half of the year, investors should adopt diversified investment and risk reduction strategies, and should not rely too much on Nvidia as the only driving force of the S&P 500 index.

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