I’m looking to invest $200K in an S&P 500 ETF and not think about it for 20 years

You’ll typically hear that your retirement portfolio isn’t something you should set and forget. It’s important to keep tabs on your investments through the years and rebalance as necessary.

Or is it? It depends on your approach.

If you decide that you’re primarily going to invest your money in S&P 500 ETFs, you may not have to do much work after all. And that’s what this Reddit poster is thinking of doing.

The poster has $200,000, and their goal is to put the money into an asset they don’t have to think about for 20 years. An S&P 500 ETF fits the bill. However, the poster may want to consider other avenues for growing wealth.

The upside of falling back on the S&P 500

The S&P 500 consists of the 500 largest publicly traded companies by market capitalization. The index is typically used to measure how the stock market is performing as a whole.

If you invest in an S&P 500 ETF, you get the benefit of instant diversification without having to go off and buy a whole bunch of individual stocks. Plus, you’re generally putting your money into established companies, as opposed to smaller ones whose futures may be more uncertain.

That’s the core benefit of investing in an S&P 500 ETF. Not only do you get to enjoy diversification and risk mitigation, but frankly, you don’t have to do a lot of work. There’s no rebalancing to worry about if you decide to put your money into an S&P 500 ETF, leave it alone for decades, and call it a day.

Plus, doing so could yield impressive results. If you were to put $200,000 into an S&P 500 ETF and let it sit for 20 years, at an annual 9% return, which is a bit below the index’s average, you could end up with more than $1.1 million. That’s not a bad payday given the lack of work involved.

The problem with falling back on the S&P 500

While there’s nothing wrong with putting all of your money into an S&P 500 ETF per se, do realize that a portfolio like that won’t be designed to beat the market. On the other hand, buying the right mix of individual stocks could yield larger returns than a portfolio of S&P 500 ETFs alone.

Let’s say that instead of having your $200,000 earn a 9% return for 20 years, it earns a 14% return instead. In that case, you could be looking at a portfolio worth almost $2.75 million instead of $1.1 million.

Both are clearly large numbers. But which sum would you rather retire with?

That’s why you may want to put together a portfolio with a mix of individual stocks and S&P 500 ETFs. And if you’re not comfortable doing that on your own, it pays to ask a financial advisor for help.

Someone with those skills can help you create a mix of assets based on your savings window, risk tolerance, and projected future income needs. They can also help make sure your portfolio is diversified so it’s protected during market downturns and poised for growth.