Reaching millionaire status isn't easy, especially if you're earning an average income. But earning $1 million or more is possible even if you're not already wealthy.
Investing in the stock market can be a fantastic way to build wealth. You don't need a lot of money to begin, and with the right strategy, you can earn well over $1 million.
Some investments are better than others, though, and it's crucial to invest in the right places to get the most bang for your buck. And there's one investment in particular that can help you make a lot of money with little to no effort on your part.
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Choosing the right investments
Picking stocks can be daunting because there are seemingly unlimited choices. One popular type of investment is the exchange-traded fund (ETF), a group of stocks or bonds packaged together into a single investment. When you invest in an ETF, you're actually investing in dozens or hundreds of stocks at once.
The Vanguard S&P 500 ETF (VOO -0.07%) tracks the S&P 500. In other words, the fund contains all the stocks from companies listed in the S&P 500.
S&P 500 ETFs carry less risk than many other types of investments, making them a smart choice for long-term investors. These funds track the stock market as a whole, so you're almost guaranteed to see positive returns over the long run.
In many cases, lower-risk investments also tend to see lower returns. But the Vanguard S&P 500 ETF has earned an average return of around 15% per year since its inception in 2010.
If you invested $400 per month in this ETF earning a 15% annual rate of return on your investments, you'd have around $2.087 million saved after 30 years.
Making the most of your money
Patience is key with long-term investments like S&P 500 ETFs, because it takes time to see substantial returns. But the longer you leave your money alone, the more you can earn.
Keep in mind, too, that S&P 500 ETFs are hands-off investments. You don't need to worry about buying or selling stocks or choosing which stocks to invest in. All you have to do is invest a little each month, then let the fund do the rest of the work for you.
One of the best parts about investing in S&P 500 ETFs is that the sky is the limit when it comes to how much you can earn. If you're able to invest a little more each month or let your money grow for a few more years, you could earn even more than $2 million.
Say, for example, you're investing $600 per month in the Vanguard S&P 500 ETF earning a 15% annual rate of return. If you invest consistently for 35 years, you'd end up with a whopping $6.344 million.
Even if you don’t earn 15% returns every year, saving regularly can still help your money grow exponentially. If you earn an average 10% return each year, for example, while investing $600 per month, you’d have nearly $2 million saved after 35 years. So even if the stock market doesn’t experience outstanding returns, you can still reach multimillionaire status.
You don't have to be an expert to make a lot of money in the stock market. By choosing your investments wisely and investing consistently, it's easier than you may think to become a multimillionaire.
