I’m searching for the best S&P 500 shares and funds to buy if I have spare cash to invest this month. Here are two I think could deliver exceptional long-term returns.
A top stock
The buzz around artificial intelligence (AI) has powered the S&P 500 through the roof over the past year. The likes of Nvidia, Microsoft and Alphabet have all risen on early signs of success in this new tech frontier.
However, I haven’t been tempted to buy these shares due to their whopping valuations. I’m concerned their high price-to-earnings (P/E) multiples could prompt sharp price reversals if confidence in AI profitability starts to weaken.
This is why Dell Technologies (NYSE:DELL) might be a better buy for me today. The semiconductor manufacturer trades on a forward P/E ratio of just 16.5 times. That’s far lower than the reading of 47.9 times for Nvidia shares.
On the downside, group earnings could be dragged down by disappointing sales of its PCs, laptops and other hardware. This has been a major problem at the business of late.
However, Dell’s progress in AI’s helping to offset problems here, and customer demand’s going from strength to strength. The firm shipped $3bn worth of AI servers between September 2023 and June.
With hardware sales also showing signs of stabilising, now could be time to consider investing.
Dell believes that its full-stack AI solutions (spanning client devices, storage, networking, servers and data protection) will simplify and speed up client adoption and drive sales through the roof. Industry tie-ups (like its Dell AI Factory with Nvidia programme launched in March) could prove pivotal in helping it achieve this.
Dell faces a lot of competition. But at current prices, I think it’s an attractive way to play the AI theme.
A great ETF
Investing in specific shares like Dell can help individuals make a market-beating return. However, holding a smaller pool of companies exposes investors to a higher level of risk.
Investors can get around this by buying shares in a tracker fund. One such instrument on my radar is the iShares S&P 500 Industrials Sector ETF (LSE:IUIS).
As the name implies, this exchange-traded fund (ETF) focuses on industrial shares like GE Aerospace, Caterpillar, RTX and Uber. In total it has holdings in 78 different companies, and since its founding in 2017, it’s delivered an average annual return of 11.1%.
I think a basket of cyclical shares like this one could outperform the broader S&P 500 if — as expected — the Federal Reserve continues to slash interest rates, boosting economic activity. That’s why it’s on my radar right now.
Remember though, the opposite is also true. And with the ETF carrying a high P/E ratio of 26.8 times, it could sink in value if the mood music around the economy and interest rate movements sours.
On balance, I think this iShares product — along with Dell shares — could be great additions to my portfolio this November.
