The S&P 500‘s started 2025 where it left 2024, moving higher! Fresh record highs in January mean that some investors think the rally from the past two years might have legs to keep going. If an investor had this thought at the same time last year and had put £750 in a tracker fund, here’s what it would be worth today.
Checking out the gains
The S&P 500’s currently at 6,052 points. This time last year, it was at 4,905 points. This marks an impressive 23.4% gain over the 52-week stretch. This means that the £750 would be worth £925.50. I should note that this is the unrealised gain as we stand. If an investor owned the tracker fund, they would only realise the proceeds if it was sold.
At first glance, this is a large percentage gain. Not only is it a positive return, but it’s also sizeable! But the real question comes as how this stacks up against other options that would have been considered for the investor in January 2024?
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They could have gone closer to home and picked a tracker fund on the FTSE 100. In that case, the investor would be up 12.9% instead. So putting money in the US stock market instead would clearly have been a better move.
Active versus passive
Yet in terms of active stock picking versus a passive tracker, there are some differences. If they had picked a member of the ‘Magnificent 7’, the return could be much larger. For example, Nvidia’s stock’s risen 88% over the same time period. Tesla‘s has doubled!
Of course, I have to be careful when making these comparisons. Even though these are popular stocks, it’s equally possible that the investor could have bought another company that lost money.
Looking ahead
It’s true that a S&P 500 tracker could perform well this year again. But I believe investors could find more value in being selective instead. For example, they could consider adding American Express (NYSE:AXP). The charge card and financial services provider has experienced a 57% jump in the share price over the past year.
I think the business could do well this year, with the latest quarterly results out earlier this month showing a 12% jump in net income versus the same period last year. Revenue’s rising, fuelled by “our premium customer base, particularly with Millennial and Gen Z consumers”.
Remember too that even if interest rates fall, the business isn’t as impacted as banks. This is becuase it earns a significant portion of its revenue from card fees and lending rather than just deposits.
However, one risk is that if we see a US recession or general economic lull, it could hit American Express. A slowdown in consumer spending would cause transaction volumes to fall.
Ultimately, I feel stocks like American Express could be considered as part of a diversified portfolio rather than just a passive tracker.
