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Building Wealth with an S&P 500 ETF
Imagine you decide to invest in an S&P 500 ETF with the aim of reaching $1 million. This kind of fund is an excellent choice for both seasoned investors and beginners, offering numerous advantages.
One of the key benefits is the ease of building a diversified portfolio with a single investment. All S&P 500 ETFs mirror the S&P 500 index (SNPINDEX: ^GSPC), which comprises stocks from 500 of the largest U.S. companies across various sectors such as technology, finance, and energy.
By investing in an S&P 500 ETF, you automatically own shares in all the index’s stocks, effortlessly diversifying your portfolio. This saves considerable time as you no longer need to individually research each stock under consideration.
Moreover, S&P 500 ETFs tend to be more secure compared to many other investment options. While no investment guarantees continuous positive returns, the S&P 500 has a long-standing record of weathering severe market downturns, recessions, and bear markets.
The index’s resilience in bouncing back from setbacks makes it challenging to incur losses over time. Studies by Crestmont Research have shown that throughout the history of the S&P 500, no 20-year period has ended with negative returns, indicating that investors would have seen gains had they held onto their investments for two decades.
Striving to Reach $1 Million or More
Actual returns will be influenced by your investment choices and future market performance. To explore the potential to reach $1 million, let’s consider a couple of scenarios.
Historically, the stock market has delivered an average annual return of around 10%. While yearly returns may fluctuate, the highs and lows tend to balance out to roughly 10% over the long term.
If you opt for individual stocks or a different fund type like a growth ETF, you might aim for higher potential returns. For illustration purposes, let’s assume an average annual return of 13% with this strategy.
To reach a total of $1 million, here’s an estimate of the monthly investments required based on the number of years saved and the expected returns:
– 20 Years:
– Monthly Investment at 10% Avg. Annual Return: $1,500
– Monthly Investment at 13% Avg. Annual Return: $1,050
– 25 Years:
– Monthly Investment at 10% Avg. Annual Return: $875
– Monthly Investment at 13% Avg. Annual Return: $550
– 30 Years:
– Monthly Investment at 10% Avg. Annual Return: $525
– Monthly Investment at 13% Avg. Annual Return: $300
– 35 Years:
– Monthly Investment at 10% Avg. Annual Return: $325
– Monthly Investment at 13% Avg. Annual Return: $160
Source: Calculations by the
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