Why do I recommend the S&P 500 for life Before discussing what to buy, let's first clarify one question: why buy US stocks? Many brothers lose money due to one root cause: lack of trust in the things they buy. If you fall a little, you panic; if you rise a little, you want to sell. You worry all day about whether to adjust your position. After reading this article, you will understand what you are buying and why you can hold the S&P 500 for a long time. Reason 1: The toughest underwear in the US stock market, separation of powers and the rule of law In the United States, the Constitution is the ultimate rule book that is particularly difficult to revise. It's not impossible to make changes, but it requires the approval of a super majority in Congress and each state, and it's hard to do it once every few decades. The separation of powers means that three judges keep an eye on each other: the President, Congress, and the courts. Even if Dong Wang wants to play tricks, he will be immediately sent off by the other two referees. So don't be fooled by his reckless use of the tariff stick since his second term in office last year, but at the last moment he changed his tune and backed down. Why? Because the Constitution stipulates that the power to impose tariffs belongs to the Congress. If the president wants to act recklessly, the court will directly reject it. He doesn't want to increase tariffs, he really can't. The separation of powers and mature rule of law can effectively protect the property rights and wealth of companies. From a micro perspective, only when the policy environment is stable can companies dare to conduct in-depth research and development for 10-20 years. It is precisely because of this sense of security that capital dares to pay in advance for technology ten years later. Where policies change frequently, any long-term investment will lose its appeal. Reason 2: US stocks have the best liquidity in the world The US stock market is a hub for global capital. Money from Europe, oil money from the Middle East, and smart money from Asia all come and go freely here. Imagine the US stock market as a vast ocean. Compare a large transaction to a giant rock as big as a mountain. Throwing it into a lake, a market with insufficient liquidity can create huge ripples and even trigger waves. Throwing into the sea, the US stock market hardly saw any waves and was instantly accommodated by a huge volume. This is the stability brought by liquidity. BlackRock and Vanguard, trillion dollar asset management giants, can smoothly adjust their positions and exchange stocks like a giant ship sailing in the deep sea, rather than triggering a tsunami in shallow waters. When a crisis strikes, you can sell at any time instead of watching the limit down board fail to sell. This sense of security that can come and go at any time will give assets a premium. Reason 3: Attraction to top talents around the world Silicon Valley and Seattle monopolize the world's top brains. Meta、 Google, Apple SpaceX。 The core competitiveness of these companies is developed by the world's best engineers and scientists. The technical gap of such talents enables US stock companies to earn monopoly profits in the long run. Wherever they are, the smartest people are adding bricks and tiles to the ecosystem centered around US listed companies. They create value, we invest value. Reason 4: The governance culture of putting shareholders first The shareholder culture of the US stock market is essentially a perfect mechanism for binding interests. The compensation of management is usually deeply linked to stock prices and options, which forces CEOs to think like shareholders. When a company holds a huge amount of cash but does nothing or acts recklessly, radical investors will enter and seize power. This external pressure forces companies to continuously optimize their ROE. Even if you are only a mini shareholder holding one share, there are professional institutions keeping an eye on the management for you. This level of governance is unique globally. Reason 5: Repurchase by listed companies is the norm in the US stock market Many mature companies in the US stock market, such as Apple, may experience a slowdown in revenue growth, but they will use large-scale buybacks to permanently eliminate some of their stocks from the world. What does it mean? The company is still the same, but this operation has reduced the total number of shares. Rare things are precious. If the total number of stocks decreases, the stocks in your hands become even more valuable. From a financial perspective, EPS continues to increase. This is the key to maintaining a bullish stock price. Nearly 2% of the funds in the US stock market are used for repurchases every year. However, in the emerging market Indian stock market, this operation only accounts for 0.05% of the total. Reason 6: 401k pension plan, long-term funds entering the market for support In 2006, the United States passed a boring bill called the Pension Protection Act. But it did something particularly cunning: the automatic joining mechanism. From your first day at work, the company defaults to deducting a sum of money from your salary and investing it into your 401k pension account. The funds in this retirement account mainly buy the Nasdaq and S&P 500. Do you want to quit? Sure, but you need to apply proactively. Human nature is inherently lazy. If you open an account voluntarily, you can delay it for 3 years. But if I set it up automatically for you, the vast majority of people will just follow the path. According to data from Pioneer Navigation, only about 10% of eligible wages entered the market in 2006, and by 2023, this proportion has skyrocketed to 59%. These funds are truly long-term funds that can only be invested and not withdrawn. Every month and every two weeks, there are huge amounts of funds scheduled, fixed, and brainless to buy US stocks. Defeat humanity with the system, and lift up the vast sea of stars with a gentle stream. Reason 7: The interests of the wealthy are tied together, and no one dares to really lift the table One of Wang's proudest achievements is feeling like he has set a new historical high in the US stock market. He took full credit for the rise in the stock market on himself. More importantly, the US stock market is tied to the wealth of too many vested interests. The high-ranking officials of the White House, the financial backers behind them, and the elites of Wall Street. Countless wealth and votes are inside. Will Wang personally smash this achievement and shake his own foundation? No. Waving the big stick of tariffs and hyping up Greenland is more about gaining bargaining chips. Not really wanting to flip over the table. The effect he wants is to show his supporters that the president is fighting hard for our interests. Thus cleverly transforming domestic contradictions into emotional issues for external relations. Where the core interests lie, no one will smash them with their own hands. Reason 8: Business in the US stock market is conducted worldwide Many people mistakenly believe that buying US stock funds is a bet on the economy of a single country in the United States. Some readers have also asked, do we still need to allocate some English and French stocks? Actually, there's no need for it. Because 40% -50% of the revenue of S&P 500 companies comes from outside the United States. You bought an apple and earned money from global fruit fans. I bought Coca Cola and earned the money for Happy Water in fat houses all over the world. In the future, when SpaceX goes public, you can even share the benefits of the space economy. This is the most efficient global investment tool, without a doubt. Reason 9: The global reserve currency status of the US dollar US stocks are assets denominated in US dollars. Whenever global geopolitical turmoil and economic uncertainty increase, the first reaction of global capital, besides increasing its holdings of gold, is to exchange money for US dollars. The converted US dollar cash is usually used to purchase other investment products. US bonds are the first choice, while US stocks are the second choice. However, it is necessary to make a small roast that this historical rule is a little invalid under the circumstances of Wang's confusion this year. Not only has it caused occasional damage to the US stock market, but it has also driven up the price of gold. I heard that my friends who got married this year have significantly increased their spending on the three funds. Reason 10: The index has a self purification mechanism of survival of the fittest This is my favorite thing and the ultimate benefit for ordinary people. You didn't buy 500 American companies when you bought the S&P 500 index, but hired a ruthless algorithm. This algorithm is regularly evaluated, automatically eliminating declining companies and incorporating excellent giants. How strict are the admission standards? The company must be registered in the United States with a market value of at least 14.5 billion US dollars. The profits of the past four quarters must be positive, and the most recent quarter must be profitable. The liquidity of stocks should be high enough to ensure that institutions can buy and sell freely. Furthermore, even if all of the above conditions are met, there is no guarantee of being selected. The S&P Committee has the final decision-making power and will consider industry representation. For example, if there is currently an excess of technology stocks, even if a technology company's market value meets the standard, it may not be able to be selected temporarily. In the past 20 years, the top ten components of the S&P 500, except for Microsoft, have almost undergone a change. You don't need to judge who is good or bad, the system automatically helps you eliminate the weak and retain the strong, always putting you on the winner's side. This algorithm has achieved an annualized return of approximately 10% over the past 70 years. Although it doesn't guarantee an annual increase, it guarantees that you will always stand on the side of the winner of the times. ---- The above ten points are not uncommon for brothers to see alone, but together they form a complete ecosystem. Stable system, good liquidity, top talent, shareholder supremacy, repurchase support, continuous pension funds, bundled interests, globalization, US dollar hegemony, and self purification of indices. This is not one factor at work, it is ten factors reinforcing each other.