Let's pretend you have $500,000. You get 500 free trades with an online broker. You're going to put your money somewhere and leave it for 25 years at least. Would you rather have:
1) $1000 of each stock in the S&P500
2) Exactly X shares of each stock in the S&P500, so say X is 10, 10 shares of Apple, 10 shares of Microsoft, 10 shares of Exxon etc. (I haven't done the math to figure out what X should be, but assume you figured out what that number was to get you really close to $500k total)
3) $500k of shares weighted by market cap ($19k in apple, $13.8K in Exxon, $9.2k in Microsoft, etc)
4) $500k of the Vanguard S&P500 index fund.
Personally, I know I'd rather have 3 instead of 4 because the Vanguard fund does the exact same thing but charges you an annual fee of $250 and their weighting penalizes companies where the founders retained lots of equity.
http://www.joshuakennon.com/sp-500s-dirty-little-secret/ I like companies where the founders retained equity.
I'm not crazy about owning so much Apple stock so I think I like 1 and 2 over 3 but I don't know why one would be better than another, anyone want to chime in?