As another round of stimulus checks is currently being distributed, millions of Americans are deciding how to spend that money.
If you're struggling to pay the bills, it's best to put your stimulus money toward necessary expenses. Likewise, if you don't have three to six months' worth of savings set aside, you may want to stash your cash in an emergency fund.
Once your financial situation is stable, you can consider investing your money. And if you want to get rich in the stock market, investing in this ETF could help you achieve that goal.
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Where to invest your stimulus check
You have seemingly endless options when it comes to choosing investments. But one type of investment you can't go wrong with is S&P 500 index funds.
Index funds are collections of stocks or bonds that mirror a particular stock market index, like the S&P 500. An S&P 500 index fund, then, contains stocks from 500 of the largest publicly traded companies in the U.S.
If you want to invest in an S&P 500 index fund, you have a variety to choose from. But one of the strongest and most well-known is the Vanguard S&P 500 ETF (VOO -0.07%).
Vanguard is a powerhouse in the investing world, and this particular fund has a strong track record since its inception in 2010. It's also one of the most affordable ETFs, with a rock-bottom expense ratio of 0.03%. So for every $10,000 you invest, you'll pay just $3 per year in fees.
Getting rich with the right ETF
By investing in the Vanguard S&P 500 ETF, it's possible to get rich with very little effort.
Since its inception, this fund has earned an average rate of return of around 15% per year. Say you were to invest your $1,400 stimulus check right now and then leave it alone for 25 years. If you're earning a 15% annual return, you'd have more than $46,000 accumulated.
To make even more money, you could invest a little bit each month. For example, say that you invest $1,400 right now, but you also invest an additional $200 per month. Assuming you're still earning a 15% annual rate of return, here's approximately how much you'd have over time:
| Number of Years | Total Savings |
|---|---|
| 5 | $19,000 |
| 10 | $54,000 |
| 20 | $269,000 |
| 30 | $1,136,000 |
| 40 | $4,645,000 |
Source: Author's calculations
Given enough time, you could become a multimillionaire by investing in this ETF.
One thing to keep in mind, however, is that it may not be realistic to assume you'll earn a 15% return year after year. The S&P 500 itself has experienced a 10% average annual return since its inception in 1957, so that may be a more realistic expectation.
Even if you earn a 10% return instead of a 15% return, though, you can still make a significant amount of money.
If you invest $1,400 now and continue investing $200 per month earning a 10% annual return, you'd have more than $1 million after 40 years. While that's not as great as $4.6 million, it's not too shabby considering this investment requires zero upkeep other than investing consistently.
Investing your stimulus check can be a smart move, as long as you choose the right investments. By investing in the Vanguard S&P 500 ETF, you can potentially turn your $1,400 check into a million-dollar portfolio.
