Founded in 1993 by brothers Tom and David Gardner, The Motley Fool has a mission to make the world smarter, happier, and richer. To achieve this, The Motley Fool offers a wide range of resources, including a website, podcasts, books, newspaper column, radio show, and premium investing services. With a strong emphasis on financial freedom, The Motley Fool has helped millions of individuals in their pursuit of financial independence. Over the years, the S&P 500 has proven to be a profitable investment, consistently delivering returns over every 20-year period in history. In fact, the index has returned an impressive 580% over the last 20 years. However, it is important to note that the opinions stated in this article may differ from The Motley Fool's Premium Investing Services, as this is a free article. The recent surge in the S&P 500, which has seen a 19% increase this year, can be attributed to various factors such as cooling inflation and better-than-expected corporate earnings. Additionally, the advancements in generative artificial intelligence (AI) have contributed to the market's performance. Generative AI, a technology that utilizes simple prompts to create content and automate business processes, has the potential to significantly improve labor productivity, leading to higher corporate profits. As a result, Wall Street analysts have set ambitious price targets for the S&P 500, taking into account the positive sentiment and potential benefits of AI. With projections like Goldman Sachs' David Kostin estimating a 9% climb to 4, 975 for the S&P 500 this year, Yardeni Research's Ed Yardeni predicting an 18% rise to 5, 400 by the end of next year, and Capital Economics' Thomas Mathews expecting a soaring 42% increase to 6, 500 by the end of 2025, investing in AI stocks seems like a compelling opportunity. However, it is wise for investors to also consider hedging their bets by diversifying their portfolio with an S&P 500 index fund, such as the Vanguard S&P 500 ETF (VOO 0. 97%). The Vanguard S&P 500 ETF allows investors to track the performance of 500 large-cap U. S. companies. With constituents spanning growth stocks and value stocks from diverse market sectors, this fund offers investors a well-rounded exposure to some of the most influential businesses globally. By investing in the Vanguard S&P 500 ETF, investors gain a stake in the U. S. economy, a sentiment supported by notable figures in the financial world. Jamie Dimon, CEO of JPMorgan Chase, hails the U. S. as the largest, most prosperous, and most innovative economy ever seen, while Warren Buffett, CEO of Berkshire Hathaway, warns against betting against America. It is crucial to note that owning an S&P 500 index fund does not mean investors have to forego owning individual stocks. Many investors, including Buffett himself, choose a combination of both as they consider individual stocks as opportunities for significant returns and the index fund as a safety net. While there are always risks involved in the stock market, including when investing in an index fund, the historical performance of the S&P 500 offers reassurance. The index has never failed to produce a positive return over any 20-year period, providing investors with a high probability of generating a profit in the long run. In fact, the S&P 500 has returned an impressive 580% over the past two decades, equivalent to an annual growth rate of 10. 05%.

Although this might be overshadowed by the potential gains of individual stocks, an S&P 500 index fund has the ability to turn regular small investments into a million-dollar portfolio. For example, assuming an annual return of 10. 05%, a weekly investment of $150 in the Vanguard S&P 500 ETF could grow into $1. 5 million in three decades' time. The growing enthusiasm surrounding AI has undoubtedly played a role in the ongoing stock market rally, and this trend is likely to continue in the years ahead. As evidenced by the fact that 110 of the S&P 500 companies discussed AI during their recent earnings calls, the increasing adoption of AI software and services is expected to enhance operational efficiency and productivity for various businesses. However, investors do not necessarily need to invest directly in AI stocks to benefit from this trend. AI is just one of many trends that have driven the stock market higher throughout history, similar to how the internet revolutionized the market. By investing in an S&P 500 index fund like the Vanguard S&P 500 ETF, investors can capitalize on these trends and the growing demand for AI, without the need for individual stock selection. It is important to consider all relevant information and conduct thorough research before making any investment decisions. The Motley Fool offers a wealth of resources, including top analyst recommendations, in-depth research, and investing tools. While this article provides valuable insights, it is advisable to seek professional advice and explore The Motley Fool's premium investing services for a comprehensive investment strategy. Disclosure: Suzanne Frey, an executive at Alphabet, serves on The Motley Fool's board of directors. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Randi Zuckerberg, a former director of market development and spokesperson for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, also serves on The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market and an Amazon subsidiary, is a member of The Motley Fool's board of directors. Trevor Jennewine holds positions in Amazon. com, Nvidia, Tesla, and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Alphabet, Amazon. com, Apple, Berkshire Hathaway, Goldman Sachs Group, JPMorgan Chase, Meta Platforms, Microsoft, Nvidia, Tesla, and Vanguard S&P 500 ETF. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy. Calculated by averaging the return of all stock recommendations since the inception of the Stock Advisor service in February 2002. Returns as of July 30, 2023. Discounted offers are available to new members, with the list price of the Stock Advisor service set at $199 per year.