Clorox Stock vs S&P 500: Which Is Best?

Warren Buffett (net worth $117.5 billion) isn’t the richest man in the world, but he is one of the world’s best investors. Buffett’s holding company, Berkshire Hathaway, is valued at nearly $800 billion. That includes a stock portfolio worth more than $300 billion, which Buffett has carefully curated over decades.

Berkshire Hathaway has large positions in Coca-Cola, Apple, Bank of America, and dozens of other companies – and that’s in addition to a collection of wholly-owned subsidiaries that span a wide variety of industries. 

However, despite his reputation for identifying high-potential stocks, Warren Buffett’s investing advice doesn’t involve complicated stock-picking strategies. Instead, his suggestion for retail investors is surprisingly simple.

During a 2017 CNBC On The Money interview, Buffett said, “The trick is not to pick the right company. The trick is to essentially buy all the big companies through the S&P 500 and to do it consistently and to do it in a very, very low-cost way.” 

In other words, Buffett’s recommendation is to stay away from choosing individual stocks. He believes that for most investors, the best way to build wealth is by making regular contributions to an ETF that mirrors the S&P 500 index. 

Of course, putting money into an index fund isn’t as exciting as buying profitable stocks – especially when those stocks belong to reliable companies with a solid competitive edge. For example, Clorox has been around since 1913, and its brand is a household name. Is Clorox stock a smart buy?

In a matchup between the S&P 500 and Clorox stock, which is best? 

Is Clorox Stock A Buy? 

Clorox is the top bleach brand, and families trust Clorox to provide all of the cleaning products they need to keep germs away. When the lockdowns wreaked havoc with the world economy, Clorox stock shot up. During the health crisis, consumers depended on Clorox to keep them safe.

Once the pandemic was under control, Clorox stock settled back into its pre-pandemic price range. As of early August 2023, total returns for the past five years are roughly 15 percent. That’s respectable, particularly when dividends are considered. Clorox shareholders currently earn a dividend yield of just under three percent. 

The trouble is that Clorox’s slow, steady growth isn’t keeping pace with the rest of the market. Inflation risk is real for Clorox shareholders, and it isn’t clear that Clorox stock will contribute to long-term wealth.

Perhaps that’s why most analysts aren’t enthusiastic about Clorox. The average 12-month CLX target price is slightly lower than the stock’s current value, and analysts generally agree that Clorox’s rating is either a “hold” or “sell.”

What Is The S&P 500 5-Year Return? 

Warren Buffett regularly recommends investing in the S&P 500 based on his core belief that American ingenuity will always create value over time.

In letters to shareholders, he has remarked that economic cycles are normal and expected, but historically, the stock market has recovered every time. Better still, it has always gone on to achieve new heights. 

Buffett can’t guarantee that the stock market will always rise if given enough time, but he has bet a fortune on his certainty that it will. He believes in the “American Tailwind,” a term he coined in his 2018 letter to shareholders. As he defines it, the American Tailwind comes down to faith that the innovators and entrepreneurs of the United States will prevail against all odds.

Based on that faith, Buffett’s recommendation to build wealth by investing in the S&P 500 is an effective strategy. The S&P 500’s average annual return is around ten percent, though individual years vary widely.

As of mid-August, the S&P 500’s five-year returns totaled approximately 59 percent, despite the fact that this period includes the 2020 market crash and the 2022 bear market. 

Economists, financial analysts, and social media personalities are still predicting a 2023 – 2024 recession, and every day, new articles warn of impending market-related doom. However, under Warren Buffett’s investment strategy, an occasional drop in the S&P 500 is good news for those who make regular contributions to a low-cost S&P 500 ETF. 

S&P 500 vs Clorox Stock: Which Is Best? 

Investing in the S&P 500 is more likely to deliver long-term growth that keeps pace with inflation when considered against most other stocks, including Clorox. However, building meaningful wealth that makes it possible to achieve financial goals requires more than buying a handful of S&P 500 ETF shares in a single transaction. 

The best way to grow a robust portfolio is to make regular contributions, regardless of market conditions. Some investors set up automatic transfers into their brokerage account once a week or once a month for the sole purpose of purchasing additional shares of their S&P 500 ETFs.

This strategy eliminates the anxiety that is common among investors when the market is volatile. Disciplined purchases through highs and lows make market conditions irrelevant. 

In financial circles, this strategy is referred to as dollar cost averaging, and it is intended to smooth out the ups and downs of standard market cycles. When prices go up, the regular contribution buys fewer shares. When prices go down, investors get more for their money. Along the way, the average per-share cost evens out – and meanwhile, the portfolio grows in value. 

Those who want to take their investing strategy to the next level can follow another bit of Warren Buffett’s advice: “Be fearful when others are greedy and be greedy when others are fearful.” In other words, a drop in the market shouldn’t be cause for alarm. The best time to buy is when everyone else is selling. Purchasing additional shares at bargain prices when the market falls – also known as “buying the dip” increases long-term profits. 

Three of the best S&P 500 ETFs include the iShares Core S&P 500 ETF, the SPDR S&P 500 ETF Trust, and the Vanguard S&P 500 ETF.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.