Choosing a single investment to carry most of your long-term savings is a big call. Many new investors see headline-grabbing tech returns and wonder if a Nasdaq-style index fund is the smart “set-it-and-hold-it” choice.

In reality, the quieter, broader S&P 500 index often makes a stronger, more resilient core holding—especially when you need one fund to do nearly everything.

Index Fund Basics

Index funds follow a simple rule: track a market benchmark instead of trying to outsmart it. The fund buys all (or most) of the stocks in a chosen index and holds them according to a set formula. That rules-based approach keeps costs low, trading infrequent, and performance close to the market it mirrors. You get diversification without constant stock-picking decisions.

Harry Markowitz, an economist, writes, “Diversification is the only free lunch in investing.”

Core Vs Support

Think of a portfolio like a building. The “core” investments are the foundation—broad, sturdy, designed to last decades. “Supporting” positions are add-ons: sector funds, factor tilts, or specialties that can boost or reduce risk around the edges. When only one fund is allowed, the core needs to handle almost everything: growth, diversification, and risk management. That’s where the S&P 500 shines.

Inside The S&P

The S&P 500 tracks hundreds of the largest publicly traded companies in the United States, listed on both the New York Stock Exchange and Nasdaq. It covers a wide mix of industries: technology, healthcare, consumer companies, industrials, utilities, and more. One sector can be the largest at times, and a small group of top companies can still represent a meaningful share, but the index remains broad compared with a single-sector approach.

Diversification Edge

Because it spreads across many sectors, the S&P 500 reflects the overall U.S. economic landscape rather than one narrow theme. When technology stumbles, healthcare or consumer staples might help soften. When financials lag, other sectors can pick up the slack. That cross-industry balance is exactly what is needed from a single, long-term core holding.

Inside The Nasdaq

The best-known Nasdaq benchmark, often tracked by “Nasdaq 100” index funds, looks very different. It includes around a hundred of the largest non-financial companies listed on the Nasdaq exchange. Technology and tech-adjacent firms make up a big share of the index. The weighting is built around large companies, so the index’s results can be tightly tied to a relatively small set of leaders.

Concentration Risk

That concentration cuts both ways. In years when major tech leaders soar, a Nasdaq-tracking fund can look like a superstar, beating the S&P 500 by several percentage points a year. But the flip side is harsh: when those same giants fall out of favor, the index can drop much faster than a more balanced benchmark. A few struggling names can drag down the whole fund.

Volatility Through Time

History has shown that tech-heavy indexes can experience deeper drawdowns in severe market breaks. During past technology slumps, Nasdaq-focused portfolios lost significantly more than diversified U.S. stock indexes. While the past decade has been friendly to large technology companies, that pattern cannot be relied on forever. Basing an entire long-term plan on one hot segment raises the odds of painful swings.

Returns Vs Sleep

Chasing the highest possible return often sounds appealing, but long-term success depends on staying invested through bad years as well as good ones. A fund that whipsaws up and down can tempt investors to sell at precisely the wrong time. An S&P 500 index fund still has plenty of volatility, but tends to be less extreme than a portfolio concentrated in one high-growth sector. More stability usually means fewer panicked decisions.

Matching Goals

The best “single fund” choice depends on what the money is for and how long it will stay invested. Savings for retirement 20 or 30 years away can tolerate more bumps than money needed for a home purchase in five years. For most long-term goals, a broad S&P 500 fund offers strong growth potential while spreading risk more evenly. The Nasdaq is often better used as an additional growth tilt, not the whole plan.

Practical Implementation

In practice, many investors choose a low-cost S&P 500 mutual fund or exchange-traded fund as their main stock holding in retirement accounts or brokerage accounts. Expense ratios are often just a few hundredths of a percent per year. For those who still want extra exposure to high-growth companies, adding a smaller allocation to a Nasdaq-tracking fund on top of that core can provide upside without concentrating everything in one theme.

Building Around One Fund

If absolutely limited to a single stock fund, the priority should be balance and durability across economic cycles. The S&P 500 brings exposure to innovative tech firms while also including banks, healthcare providers, consumer brands, utilities, and more. That breadth makes it easier to add future building blocks later—such as international stocks or bonds—without having to unwind a risky, overly narrow position.

Conclusion

When the choice comes down to one core investment, a diversified S&P 500 index fund usually beats a tech-heavy fund for most long-term investors. It may not always top the performance charts, but it offers a steadier ride and a broader slice of the economy. If you had to pick one core stock fund today, would you feel more comfortable owning a single sector’s story—or the full mix of leading companies across many industries?