After more than two decades covering markets, journalist James Brumley has arrived at a clear and consistent answer for beginner investors wondering where to start.
His recommendation is not a hot stock tip or a complex financial product but instead a straightforward index fund tied to the S&P 500.
Brumley points to the Vanguard S&P 500 ETF (NYSEMKT: VOO) and the SPDR S&P 500 ETF Trust (NYSEMKT: SPY) as the ideal first investment for anyone new to the market.
Both funds are designed to mirror the performance of the S&P 500 Index, giving investors broad exposure to the largest publicly traded companies in the United States.
The core of Brumley’s argument is counterintuitive but well-supported: the harder investors try to beat the market, the more likely they are to underperform it.
Over most three-year, five-year, and ten-year stretches, most mutual funds available to U.S. investors failed to match the performance of the S&P 500, according to the article.
Hedge funds, managed by some of Wall Street’s highest-paid stock pickers, also regularly trail the S&P 500 despite the resources and expertise behind them.
Brumley, a former stockbroker, attributes much of this underperformance to excessive trading activity driven by short-term headlines rather than sound long-term strategy.
As he puts it, “Too many investors are far too active, buying and selling stocks only based on hot headlines without considering the fact that those headlines are mostly just meant to attract readers rather than serve as sound investment advice.”
He adds that those headlines are “often backward-looking rather than forward-minded,” meaning constant reactions to news erodes net portfolio performance over time.
The S&P 500 Index has delivered an average annual gain of roughly 10% per year since 1928, making it a historically reliable benchmark for long-term wealth building.
Owning an index fund like VOO or SPY means investors capture that broad market return without the risk of picking individual stocks that may lag or collapse entirely.
Brumley is clear that this is not the most exciting investment strategy, describing it as “not the sort of pick you brag about owning at cocktail parties.”
However, he argues it is the most practical choice for investors who want real market participation without the expertise required to evaluate individual companies.
One of the more useful points in his argument is that index fund ownership does not need to stop when an investor gains more confidence and begins selecting individual stocks.
The S&P 500 index fund works well as a permanent foundational holding, sitting alongside individual company positions in a portfolio without requiring constant monitoring or active management.
For beginners especially, this approach removes the pressure of trying to outperform professionals who, statistically, often fail to beat the very index these simple funds track.
