Buying S&P 500 index funds is the most stable wealth strategy this year.

Driven by technology giants such as Nvidia, the S&P 500 index has already set 31 historical highs this year, rising for eight weeks out of the past nine and accumulating a total gain of approximately 15% as of June, and it's only June.

According to Athanasios Psarofagis, an ETF analyst at Bloomberg Intelligence, only 23% of stock ETFs have outperformed the S&P 500 index this year. Most actively managed ETFs, quant-driven smart beta ETFs, and thematic investment ETFs can't beat the S&P 500.

Although Wall Street fund managers have been investing heavily in various complex diversified strategies, they cannot ignore the fact that the plain and simple S&P 500 index has outperformed three-quarters of ETFs this year.

Julian Emanuel, Chief Stock Strategist at Evercore ISI, said, "In an environment like 2024, which is low volatility and high return, investors should stick to basic strategies——buy simple index funds and actively managed mutual funds with good alpha records. There's no need for complicated strategies. Simple is beautiful."

Legendary investor Warren Buffett has also said that ordinary investors should buy index funds for the long term, rather than following others' stock-picking advice. Buffett said, "For most people, the best thing to do is to buy an S&P 500 index fund. People pay a lot of money for investment advice that they really don't need. If you're betting on America and holding that position for decades, you're going to do far better than buying Treasury securities, or than following people who are telling you what to do."

Although the S&P 500 is good, risk still needs to be taken into account.

Although indices like the S&P 500 and Nasdaq continue to set new highs, making faithful 'buy-and-hold' investors rich, there is a hidden danger behind the imbalanced rally of the S&P 500—that is, most of the gains have come from a few individual stocks. For example, Nvidia's stock alone has contributed to more than 30% of the index's gain this year.

After briefly becoming the world's largest company by market cap earlier this week, Nvidia has fallen for two consecutive trading days, with a cumulative market cap loss of over $220 billion, which has also dragged down the performance of the S&P 500 in the last two trading days.

"Entering the second half of the year, diversified investment and risk reduction are the right action strategies. Investors should not expect Nvidia to continue to be the sole driving force behind the S&P 500," said Michael O'Rourke, Chief Market Strategist at Jonestrading.

Edited by Jeffrey