Investing in the stock market can be intimidating, but it’s one of the best ways to generate wealth over a lifetime. It’s also easier than you may think to begin, and you don’t need to be a stock market expert to choose the right investments.
You also don’t need a lot of money to get started. In fact, if you’re able to invest just $100 per month, you could build a portfolio worth more than half a million dollars — as long as you have the right investments.
Choosing the best wealth-building investments
If you’re new to the stock market or simply want a “set it and forget it” type of investment, one of your best options is the S&P 500 ETF. This fund contains all the stocks within the S&P 500 index itself, which are some of the largest and strongest stocks in the country.
S&P 500 ETFs have several advantages. For one, they’re very likely to survive market crashes. All investments will be subject to short-term volatility, but strong stocks have a better chance of surviving that turbulence and experiencing long-term growth.
The S&P 500 itself was established in 1959, and despite the numerous crashes it’s seen since then, it’s always recovered. It’s also earned a 10% average annual rate of return since its inception. Some years it’s earned explosive returns, while other years it’s experienced losses. Over time, though, those returns have averaged out to around 10% per year.
Another advantage of the S&P 500 ETF is that it’s a fantastic long-term investment. This type of fund performs best when it has plenty of time to grow — ideally, a few decades. If you leave it alone long enough, you can earn a substantial amount of money.
How much can you earn with an S&P 500 ETF?
These investments may be relatively safe, but they can make you a lot of money, too.
Say, for example, you’re investing in an S&P 500 ETF earning a 10% average annual return. If you invest just $100 per month and leave your money alone for 40 years, you’d have approximately $531,000.
Of course, not everyone has 40 years to wait. But the more you’re able to save each month, the faster your money will grow. For instance, if you were to invest $250 per month for 30 years, you’d have around $493,000 saved. Or invest $425 per month for 25 years, and you’d have around $502,000 accumulated (assuming you’re still earning a 10% average annual return).
Generating hundreds of thousands of dollars in the stock market takes time, but keep in mind that S&P 500 ETFs are hands-off investments. In other words, you can set your savings on autopilot and make money while you sleep.
How to get started
There are several S&P 500 ETFs to choose from, and many of them are similar. All of these funds track the S&P 500 itself, so they all include the same stocks. Some funds, though, may charge higher fees than others. Some of the best S&P 500 ETFs include:
iShares Core S&P 500 ETF (NYSEMKT: IVV)
SPDR S&P 500 ETF Trust (NYSEMKT: SPY)
Vanguard S&P 500 ETF (NYSEMKT: VOO)
Regardless of which fund you choose, S&P 500 ETFs can be a fantastic addition to your portfolio. By investing consistently and staying invested for the long haul, you can build a portfolio worth hundreds of thousands of dollars or more.
10 stocks we like better than Vanguard S&P 500 ETF
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now… and Vanguard S&P 500 ETF wasn’t one of them! That’s right — they think these 10 stocks are even better buys.
*Stock Advisor returns as of August 9, 2021