Whether you are new to the stock market or an experienced investor, you probably want to make as much money as possible. But the market can be volatile, and if you invest in the wrong places, you could easily lose more than you gain.
While there are never any guarantees in the stock market, there is an investment strategy that is likely to help you make money over time. Stay there long enough and you might even become a millionaire investor.
Invest for the long term
Investing in the stock market is not a get-rich-quick scheme, and short-term strategies could cost you money. Instead, you’re better off investing for the long term.
Long-term investing is all about buying solid investments and holding them for as long as possible. Shares of strong companies are likely to increase in value over time and survive market volatility. By filling your portfolio with these types of investments, you will gradually build up a wealth.
There are many long term investments to choose from. If you like to research companies, investing in individual stocks may be the right option for you. But if you prefer to take a hands-off approach, you might decide to invest in S&P 500 index funds.
How S&P 500 Index Funds Could Make You a Millionaire
An S&P 500 index fund is a collection of stocks that replicate the S&P 500 index itself. In other words, you instantly buy around 500 stocks in a single investment.
S&P 500 index funds are relatively safe investments because they include stocks of some of the largest and strongest companies in the United States. Many of the S&P 500 companies are well known names, including Amazon, Apple, Microsoft, and the parent company of Google, Alphabet. These companies are likely to grow over time, and they also have a good chance of bouncing back from a stock market crash.
Since its inception in 1959, the S&P 500 has earned an average rate of return of around 10% per year. Of course, he had many ups and downs during this time. However, while it doesn’t record 10% returns year after year, the ups and downs spread out on average over time.
By investing regularly, it is possible to become a millionaire with S&P 500 index funds. For example, suppose you invest $ 350 per month while earning an average annual rate of return of 10%. After 35 years, you would have about $ 1.138 million in savings.
The more time you have to save, the less you will need to save each month to become a millionaire. For example, if you have 40 years to save and you get an average annual return of 10%, you would only need to invest about $ 200 per month to reach $ 1 million in savings.
Help your money grow faster
It takes time for your money to grow, but when it comes to the stock market, slowness and consistency wins the race.
S&P 500 index funds are also some of the easiest investments to make, making them perfect for hands-off investors. You never have to worry about picking stocks or deciding if it’s time to sell your investments. In fact, the more you put aside your investments, the faster your money will grow.
When it comes to choosing S&P 500 index funds, you have many options. Some of the most popular funds include the Vanguard S&P 500 ETF (NYSEMKT: VOO), IShares Core S&P 500 ETF (NYSEMKT: IVV), and SPDR S&P 500 ETF Trust (NYSEMKT: SPY).
It is possible to become a millionaire by investing in the stock market, but it is important to have the right strategy. By buying solid investments and keeping them for the long term, you can earn more than you think.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.