The stock market is a time-tested path to achieving financial independence, but new investors often have no idea where to start. There are thousands of publicly-traded companies and countless variables to consider, which makes it easy to get overwhelmed. Fortunately, there are less complicated ways to make a fortune in the stock market.
Index funds attempt to track the performance of a particular market index, usually a group of stocks or bonds, and the benefits typically include instant diversification and passive management. That means patient investors can build life-changing wealth with very little effort.
Here are two index funds that could make you a stock market millionaire.
1. Invesco QQQ Trust
The Invesco QQQ Trust (NASDAQ: QQQ) tracks the performance of the Nasdaq-100, an index comprising 100 of the largest non-financial companies listed on the Nasdaq stock exchange. The fund includes both U.S. and international companies, and it is heavily weighted toward three market sectors: information technology, consumer discretionary, and communications services.
Specifically, 50% of the Invesco QQQ Trust is allocated to technology stocks like Apple and Nvidia, 17% is allocated to consumer discretionary stocks like Amazon and Tesla, and 16% is allocated to communications stocks like Alphabet and Meta Platforms. That means 83% of the fund is spread across just three of the 11 market sectors, which makes the Invesco QQQ Trust riskier than a more diversified fund. That said, it has also translated into jaw-dropping returns.
The Invesco QQQ Trust has produced a total return of 388% over the last decade, which is equivalent to an annualized return of 17.1%. At that pace, $100 invested on a weekly basis would grow into a $1 million portfolio in just under 22 years. Of course, past performance is never a guarantee of future returns, but the Invesco QQQ Trust still looks like a particularly attractive option for investors that are bullish on the information technology sector.
As a final thought, the Invesco QQQ Trust bears an expense ratio of 0.2%, meaning investors will pay $20 per year on a $10,000 portfolio. That is roughly in line with the industry average, and it is quite a bit cheaper than the fees typically charged by actively-managed mutual funds.
2. Vanguard S&P 500 ETF
The Vanguard S&P 500 ETF (NYSEMKT: VOO) tracks the performance of the S&P 500, an index comprising 500 of the largest U.S. companies. The fund is more diversified than the Invesco QQQ Trust. It includes stocks from all 11 market sectors, though certain sectors are still weighted more heavily.
The chart below shows the sector allocation of the Vanguard S&P 500 ETF.
Market Sector
Vanguard S&P 500 ETF Allocation
Information Technology
27.9%
