The Motley Fool: Get to know your Alphabet

The Fool’s Take

Alphabet is the parent company of Google, Google’s subsidiary YouTube and Waymo, among other businesses. Despite concerns that artificial intelligence chatbots would pull traffic away from Google Search, those fears appear to be overblown.

Alphabet reported that over 2 billion people were using its AI Overviews during the second quarter, and Google Search generated a record $54.2 billion in revenue during Q2, up 11.7% from the year-ago period.

Google has been the undisputed internet search leader, recently controlling 90% of the worldwide search market. It’s also a key player in digital advertising, driven by its Google Search and YouTube streaming video services.

In 2024, eMarketer estimated that Google captured around 26% of U.S digital advertising revenue. Alphabet is a leader in cloud computing, as well, with that area experiencing year-over-year revenue growth of 32%.

Many investors had worried about antitrust decrees breaking up the company, but a U.S. federal judge recently ruled that Google will not have to divest its Chrome browser. And Alphabet’s stock is reasonably valued at recent levels. Long-term investors should take a closer look at Alphabet.

(The Motley Fool owns shares of and recommends Alphabet.)

Ask The Fool

From T.C., Columbus, Ind.: I keep reading about the S&P 500. What is it?

It’s an index of around 500 stocks. Launched in 1957, it was originally made up largely of industrial companies, with some utilities and railroads as well. Financial companies were added in 1976.

Today, its biggest sector is technology (recently about a third of assets), with less than 10% in industrials.

The index is often used as a stand-in for the entire U.S. stock market, or at least for large U.S. companies. Together, the 500-ish companies make up about 80% of the value of the total U.S. stock market.

You’ll find lots of familiar names in the S&P 500, such as American Express, Apple, AT&T, Boeing, Coca-Cola, Costco Wholesale, CVS Health, Deere, DoorDash, Exxon Mobil, Kroger, Lowe’s, McDonalds, Merck, Netflix, Nike, Progressive, Starbucks, Uber Technologies, Visa and Walmart.

It’s easy to invest in the S&P 500 via a low-fee index fund such as the Vanguard S&P 500 ETF (VOO) or the SPDR S&P 500 ETF (SPY).

From N.D., Falls Church, Va.: What’s a 529 plan?

It’s a college savings plan that offers some tax breaks when the money in it is used for qualified educational expenses.

While contributions to these plans are not tax-deductible, earnings in them are generally not taxed when spent on expenses such as tuition, fees, books and room and board at an eligible institution of higher education, or on tuition at elementary or secondary schools.

There are two key types of 529 plans: savings plans and prepaid tuition plans. Each state has its own plan(s), often with unique features — and you don’t have to use your own state’s plan.

Learn more at sites such as SavingforCollege.com and CollegeSavings.org.

The Fool’s School

When you’re buying a home, you want to have as high a credit score as possible in order to qualify for low interest rates. You should shop around for the best mortgage deal you can find — but don’t assume that your best alternative is a 30-year loan.

Though most homebuyers do opt for standard 30-year mortgages, some will be best served by shorter terms. Here are some pros and cons to consider. For starters, a shorter term will generally feature a lower interest rate and much less paid in interest over the life of the loan.

For example, imagine you buy a $400,000 home, putting 20%, or $80,000, down and borrowing $320,000. With a 30-year loan, you might get a typical recent interest rate of 6.4%, giving you a $2,363 monthly payment — and a total of $400,583 paid in interest over those years.

With a 15-year loan, you might get a 5.4% interest rate, with a $2,959 payment but only $147,589 in total interest paid.

If you can manage the larger payment, you’ll really come out ahead. A shorter term also means you’ll build equity in your home faster, and you’ll own it outright sooner — which might be especially appealing if you’re not that far from retiring.

Shorter loans can be harder to qualify for, though, and can stretch your budget thin. Longer loans offer lower payments, which can free up funds for investing or emergencies. Which should you choose? Well, crunch the numbers for yourself.

Be aware that there are some alternatives or compromises: You might swing a shorter-term loan by buying a less costly home — which can also cost you less in taxes and insurance. Or you might get a 30-year loan but make extra payments on it regularly, shortening its life (though some lenders charge prepayment penalties).

You might even explore a 10-year or 20-year loan, if those seem right for you. Learn more about mortgages and other personal finance topics at ConsumerFinance.gov/consumer-tools and Fool.com/money.

My Dumbest Investment

From G.R., via email: My most regrettable investment move? Well, I’ve been a Motley Fool subscriber since 1998, and I invested in a bunch of Fool-recommended stocks in the early 2000s — stocks such as Amazon (at around $25 per share) and Labcorp — which were stellar choices.

Unfortunately, I sold them in 2011. They’d all performed well, so I figured I must be an investing genius, right? I used the proceeds to build a second home on 40 acres in my wife’s home state near her family.

Here’s the rub: Amazon proceeded to rise to over $3,000 per share, and I’d sold at about $390, missing a huge gain. We should have gotten a mortgage!

The Fool responds: You did leave thousands — or perhaps tens or hundreds of thousands — of dollars on the table, but at least this regrettable investing move was a profitable one. You netted around $365 per Amazon share, for example.

Still, you’re right that you should have at least considered opting for a mortgage instead of paying cash.

As a rule of thumb, if your mortgage interest rate is significantly lower than the annual growth rate you expect from your portfolio, it can be better to borrow at the low rate and hope to well exceed it with your investments.

(Do you have a smart or regrettable investment move to share with us? Email it to TMFShare@fool.com.)

Who Am I?

I trace my roots to 1943, when a Swedish 17-year-old started selling things such as pens, wallets and nylon stockings. He expanded to furniture in 1948. He focused on low prices and innovated, with flat-packed self-assembly items.

I’m a massive global retailer now, privately owned, recently with 487 stores in 63 markets. I raked in 45 billion euros in fiscal 2024, down more than 5% from the year before — mainly due to my lowering prices (as I like to do).

I employ more than 200,000 people. My logo features the colors of the Swedish flag.

Who am I?

Forget last week’s question? Find it here.

Last week’s answer: Inspire Brands