Does a $1 million nest egg sound nice for retirement? If it does, you’re in good company. The reality is that many of your living costs might rise as you age, and it helps to kick off your senior years with a sizable nest egg.
Now you’ll often hear that with the right investing strategy, you can grow enough wealth to become a millionaire retiree. But what if you’re not particularly well-versed in choosing stocks? Or what if the idea of doing so scares you? If that’s the case, you may be wondering whether reaching millionaire status is attainable for you.
In that regard, I have some good news. You don’t need to be a stock-picking genius to do well as an investor. In fact, if you load up on one specific investment, there’s a good chance you’ll amass $1 million or more in your lifetime.
Rely on the power of the broad market
You’ll often hear that assembling a diverse mix of stocks could be your ticket to growing wealth. But that doesn’t mean you have to spend hours upon hours each month researching different companies and digging into their financials. Rather, there’s an easier way — investing in S&P 500 index funds.
When people talk about the stock market’s performance on a whole, often they’re referring to the performance of the S&P 500. And so if you put money into index funds whose goal is to track that index, there’s a strong chance you’ll do quite well for yourself.
From its inception in 1926 through 2018, the S&P 500 has delivered an average annual return of 10% to 11%. That means that if you invest in S&P 500 index funds over a lengthy window of time, there’s a good chance you’ll enjoy comparable returns.
Now, say you’re able to invest $500 a month in S&P 500 index funds over a 40-year period. At a 10% average annual return, you’re looking at an ending balance of about $2.66 million. And even if you’re only able to invest $200 a month during that time frame, you’ll still wind up with over $1 million, assuming that same return.
Of course, keep in mind that the S&P 500 may not deliver a 10% return every year. It may have years when it loses value. But if you’re investing on a long-term basis, it’s a solid bet for growing retirement wealth or meeting whatever financial goals you set for yourself.
Set yourself up for financial security
When it comes to long-term investing, you have plenty of choices. But it pays to consider putting at least some of your money into the broad market. Buying shares of an S&P 500 index fund is easier than going out and acquiring hundreds of stocks yourself, so you might as well simply the process as much as you’re able to.
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