Investing in the stock market is one of the best ways to generate wealth. Even if you're not already wealthy, investing just a little bit at a time can amount to more than you think.
It's crucial, however, to invest in the right places. Putting your money behind risky or dangerous investments could do more harm than good, so it's important to be strategic about where you invest.
While there are plenty of fantastic stocks and funds to choose from, this one Vanguard exchange-traded fund can limit your risk while putting you on the path to becoming a multimillionaire.
Choosing the right investment
Exchange-traded funds (ETFs) are great investment options for many people, because they allow you to invest in hundreds or even thousands of stocks at once. This limits your risk and provides instant diversification.
The Vanguard Total Stock Market ETF (NYSEMKT: VTI) tracks the stock market as a whole, and it contains 3,791 stocks from a wide variety of industries. A few of the largest stocks in the fund are Microsoft, Apple, Alphabet, and Amazon.
This ETF is designed to emulate the stock market as a whole, which means you're very likely to see positive returns over time. While the stock market does experience short-term volatility, it's always managed to earn positive returns over the long run.
If you invest in the Vanguard Total Stock Market ETF, you'll likely experience ups and downs over the short term. But if you hold this investment for decades, you should see positive average returns.
How much can you earn with this ETF?
Since this ETF's inception in 2001, it has earned an average rate of return of around 9% per year.
This doesn't necessarily mean you'll earn 9% returns year after year. Some years you'll experience returns much higher than this, while other years you may experience lower-than-average returns or even losses. However, over time, those earnings should average out to around 9% per year.
Say you invest in this ETF today, and you're earning a 9% average annual return. If you were to invest $500 per month, you'd have around $2.027 million after 40 years.
Of course, 40 years is a long time to wait, and $500 per month is a lot to invest each month. Keep in mind, though, that this ETF is a hands-off investment. You never need to worry about buying or selling stocks, and you can rest easy knowing your investments are likely to recover from even the worst market crashes. All you need to do is invest consistently and watch your money grow.
If you can't afford to invest $500 per month or wait 40 years, you can still save and earn a significant amount of money. The most important thing is to let your money grow for as many years as possible. The more time you have to invest, the more you can potentially earn.
It's possible to become a multimillionaire by investing in the stock market, as long as you're strategic about it. If you invest consistently, the Vanguard Total Stock Market ETF can help you get there.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Katie Brockman owns shares of Vanguard Total Stock Market ETF. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, and Microsoft. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.