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The S&P 500 has been one of the investment sector’s most reliable performers for almost 70 years. The index’s public filings show an average annual return in the 10% range since 1957. Despite that strong history, Goldman Sachs analysts believe the S&P 500’s returns will trend dramatically downward over the next decade. Fortunately, investors looking to diversify can consider an ETF that has outperformed the S&P 500.
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Averaging double-digit gains for 67 years is no easy task and an index that pays so well for so long will inevitably have a stretch where it performs sub-optimally. Goldman analysts believe that time has come for the S&P 500. They recently released a report predicting the S&P 500 will produce returns in the 3% range for the next decade.
If Goldman’s prediction is correct, one of the world’s most respected indexes could pay off at 70% less than its historical average. Goldman’s Chief U.S. Equity Strategist, David Kostin, released the bearish estimate, basing it on input from several of his firm’s analysts, who forecast S&P 500 returns between a low of 1% and a high of 7% between now and 2034.
It’s worth noting that Goldman’s 3% prediction is decidedly bearish and other analysts predict returns closer to 6%. However, even that forecast would be a marked reversal from the index’s 13% average over the last decade. Goldman’s report said, “This range roughly corresponds with a 95% confidence band around our estimate and reflects the uncertainty inherent in forecasting the future.”
Goldman hasn’t lost all its faith in the index, but many analysts agree that the S&P’s historic growth rate and performance will be difficult to sustain. This leaves investors looking for a diversified passive income stream in a bit of a quandary. After all, most people don’t have the time or expertise to put together a stock portfolio that averages a double-digit annual return.
ETFs are one way for investors to benefit from a highly diversified portfolio, making them a potential alternative to indexes. Investors can choose from various ETF sectors. It’s no secret that tech is an incredibly lucrative investment sector right now and the Vanguard Information Technology Index ETF has been quietly delivering solid returns on the strength of its tech holdings.
This ETF has almost half (44%) of its 316-stock portfolio invested in Apple, Microsoft and Nvidia. All three companies are recognized global leaders in tech and AI, giving them continued growth potential. Their heavy presence in this ETF portfolio helps explain why its share value is up by a whopping 624.5% in the last decade, nearly triple the S&P 500’s 274% during the same period.
Despite those potential benefits, investors should remember a few important caveats when considering Vanguard’s Technology Index ETF. First, its continued performance is heavily contingent on Apple, Microsoft and Nvidia. Second, while this ETF’s share value has appreciated significantly, it does not pay a very high dividend, so you may need to consider other options if passive income is your primary goal. Finally, past performance doesn’t guarantee future results.
EquityMultiple’s ‘Alpine Note — Basecamp Series’ is turning heads and opening wallets. This short-term note investment offers investors a 9% rate of return (APY) with just a 3 month term and $5K minimum. The Basecamp rate is at a significant spread to t-bills. This healthy rate of return won’t last long. With the Fed poised to cut interest rates in the near future, now could be the time to lock in a favorable rate of return with a flexible, relatively liquid investment option.
What’s more, Alpine Note — Basecamp can be rolled into another Alpine Note for compounding returns, or into another of EquityMultiple’s rigorously vetted real estate investments, which also carry a minimum investment of just $5K. Basecamp is exclusively open to new investors on the EquityMultiple platform.
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