SPDR S&P 500 ETF Trust (SPY), iShares Russell 2000 Index (ETF) (IWM): Why This Could Be the Best Investment of Your Life

A step further

If you do choose to invest in an index, you’re most likely investing for the long-term, so why not add some proven theory to the mix. It has long been established that a well diversified small-cap portfolio will outpace a large-cap portfolio over time. The iShares Russell 2000 Index (ETF) (NYSEMKT:IWM), is an ETF that tracks an index that has returned 324% over the past 20 years. This works out to be a 16.2% per year average, turning an initial $10,000 investment into $201,429.

Some of its top holdings are CoStar Group, athenahealth, CommVault Systems, and FirstMerit. This ETF has an average daily volume of around 38 million shares and has about $26 billion in assets. It has also returned about 24% year to date.

If you had invested $10,000 in an index which follows the tech-heavy Nasdaq Composite 20 years ago, you might be sitting on a beach right now. Over that time the Nasdaq has enjoyed a 761.82% return, a 30% per year average. This is a record which would make any portfolio manager turn green with envy. It would also have turned you into a millionaire.

Here, you’ll find heavy hitters like Cisco, Intel, and Amazon.com. Indeed, the Nasdaq is filled with some of the best businesses of our age.

If you can’t beat it, join it

While there’s no shame in trying to beat the market, why bother? When it comes to your wealth and an even more valuable resource, (your time), why not play it safe. There’s no need to slave over spreadsheets and watch the talking heads on TV, in an attempt to earn a few more percentage points. Instead, buy an index, relax, and enjoy your time. Your family will probably be glad you did.

The article Why This Could Be the Best Investment of Your Life originally appeared on Fool.com and is written by Ken Conte.

Ken Conte has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Ken is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.