Imagine investing £30,000 a decade ago and now sitting on a hefty £117,148. This remarkable feat is not just a dream, but a tangible reality for those who chose to invest in the S&P 500 Index. Since its establishment in 1957, this index, encompassing the 500 largest US companies by market capitalization, has consistently provided strong returns and played a pivotal role in diversifying investment portfolios.
The performance of the S&P 500 speaks volumes, with a staggering 196% increase in value since December 9, 2014. This impressive growth translates to an average annual return of 11.4%. But wait, there’s more! When factoring in dividends, the index’s average annual return skyrockets to an impressive 13.7%. In comparison, the average annual returns (including dividends) of the FTSE 100 and FTSE 250 lag significantly behind, hovering just above and below 6%.
Tech is the driving force behind the S&P 500’s ascent, with tech companies dominating the index. This sector is notably absent in the UK, making it a compelling investment opportunity. The surge in these tech giants’ value is fueled by investor enthusiasm for the evolving digital landscape. Moreover, the increasing emphasis on artificial intelligence (AI) has generated hype in the market, with strong performances from companies like Nvidia, Alphabet, and Microsoft boosting demand for their shares.
However, AI is just one piece of the technological puzzle. There exists a plethora of tech growth segments that could propel the S&P 500 to greater heights in the long run, including cloud computing, green technology, robotics, cybersecurity, quantum computing, the Internet of Things (IoT), and autonomous vehicles.
In light of these trends, adding US exchange-traded funds (ETFs) with a focus on tech stocks to one’s portfolio appears prudent. The HSBC S&P 500 ETF provides exposure to the entire index, while the iShares S&P 500 Information Technology Sector ETF offers more targeted access to tech stocks. Furthermore, diversification can be complemented by strategically investing in individual tech shares. Dell Technologies, with its promising foray into the AI arena and attractive valuation at a forward P/E ratio of 15.8 times, emerges as a top contender for investment opportunities.
Dell’s recent milestones in AI server sales and the innovative use of liquid cooling technology underscore its potential for future growth. While facing robust competition in the AI sector, the strides made by Dell demonstrate a positive trajectory, enhancing its appeal as an investment option at current prices. Consider tapping into the tech revolution and seizing the opportunities presented by companies like Dell to boost returns and diversify your investment portfolio effectively.
