Please ensure Javascript is enabled for purposes of website accessibility

Invest Your Stimulus Check for a Guaranteed Profit: Here's How

By Sean Williams – Apr 18, 2020 at 8:06AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Historically, this investment has netted a gain for investors 100% of the time.

For the past two months, stock market volatility has been historically high. The proliferation of the coronavirus disease 2019 (COVID-19) pushed equities into the fastest bear market in history, with the benchmark S&P 500 (^GSPC -1.72%) taking a mere 17 trading sessions to lose 20% of its value and 22 trading sessions (about one month) to shed 30% of its value.

COVID-19 has also cost a lot of Americans their jobs, at least in the short term. In a three-week span, close to 17 million Americans have filed an initial unemployment claim. And it could get worse, at least according to economists at the St. Louis Federal Reserve.

Mitigation measures currently in place to slow transmission of the coronavirus, including the closure of nonessential businesses, may temporarily push the U.S. employment rate as high as 30% and lead to a recession. For context, the unemployment rate was at a 50-year low of 3.5% prior to COVID-19.

Uncle Sam's arm emerging from a mailbox with cash in his hand.

Image source: Getty Images.

Up to 80 million Americans may have received a stimulus check this week

With the coronavirus leading to unprecedented economic disruption, lawmakers had no choice but to pass the largest economic stimulus in history in late March: the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Coming in at $2.2 trillion, the CARES Act set aside $500 billion for distressed industries, $350 billion for small business loans, $260 billion for the expansion of the unemployment program, and $300 billion for direct payments to perhaps 175 million Americans.

As you can imagine, these stimulus checks are garnering most of the attention. People can expect to receive up to $1,200 ($2,400 for couples), assuming their adjusted gross income (AGI) for their most recent federal tax filing was under $75,000 (or $150,000 for a couple filing jointly). Individuals and couples filing jointly with respective AGI's above $99,000 and $198,000 won't qualify for a stimulus check, while dollar figures in between these amounts ($75,000 to $99,000 in AGI for single filers, and $150,000 to $198,000 in AGI for couples) will receive a reduced payout. Parents will also receive $500 per qualifying child (aged 16 and under).

According to Treasury Secretary Steven Mnuchin, an estimated 80 million Americans should have received their stimulus checks via direct deposit this week, with tens of millions of paper checks still to be processed. 

A businessman rifling through a stack of cash in his hands.

Image source: Getty Images.

No joke: You can invest your stimulus check for a guaranteed profit

For some folks, this stimulus check represents a much needed lifeline to pay bills or put food on the table during the coronavirus pandemic. But for those with a sufficient emergency fund, investing their stimulus check might prove to be the best option.

What might make the idea of investing your stimulus check even more palatable is that you can practically guarantee yourself a profit. Although the stock market isn't exactly the best place to look for guarantees, history shows that there's one surefire way to make money, as long as you're willing to be patient.

While you'll get no bonus points for originality, arguably the safest long-term investment a person can make is to buy the SPDR S&P 500 ETF Trust (SPY -1.68%), which attempts to mirror the performance of the benchmark S&P 500 as closely as possible. It's the largest exchange-traded fund by assets, with $252.5 billion in assets under management, and it boasts a reasonably low net expense ratio of 0.09%, which is ultimately dwarfed by the SPDR S&P 500 ETF's yield of 2.25%. 

If you're out to make a quick buck, Las Vegas' table games might be your best bet. But if you're willing to invest your stimulus check into the SPDR S&P 500 ETF Trust for a period of 20 years, history suggests you're a sure thing to come out a winner.

A cheering businesswoman with her hands in the air who's standing in front of a choppy but rising chart.

Image source: Getty Images.

According to data provided by Crestmont Research, which examined rolling 20-year returns for the S&P 500 ending in each of the past 100 years, there hasn't been a bad time to invest into an S&P 500 tracking index. There were only two years over the past 100 years (1948 and 1949) when the rolling 20-year returns ending in those years, inclusive of dividends, yielded an average annual gain of less than 5%. By comparison, ending the 20-year rolling period in more than 40 out of the past 100 years would have yielded an average annual return, inclusive of dividends, of at least 10%.

On average, the stock market returns 7% per year, inclusive of dividends. This means investors can expect to double their money about once a decade. Based on these historic returns, a $1,200 stimulus check invested in the SPDR S&P 500 ETF Trust today could be worth closer to $4,800 by the time 2040 rolls around.

Invest and be patient -- it's really that simple.

Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

SPDR S&P 500 ETF Trust Stock Quote
SPDR S&P 500 ETF Trust
$367.95 (-1.68%) $-6.27
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$3,693.23 (-1.72%) $-64.76

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.