The stock market can be intimidating, especially when it's experiencing volatility. It may be tempting to stash your cash in a savings account, but that will make it more challenging for your money to grow.
Despite its volatility, investing in the stock market is one of the easiest and most effective ways to grow your savings. Whether you're preparing for retirement or are simply trying to generate long-term wealth, investing your money can help you reach your goals -- and it's easier than you may think.
Even if you can't afford to invest much, you can still grow your savings in the stock market. By investing now, you could potentially turn $10,000 into $500,000 over time.
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Where should you invest?
First, it's important to make sure you're choosing the right investments. Some are riskier than others, and if you invest in the wrong places, you could lose more than you gain.
If you're new to the stock market or simply want a hands-off investment that requires zero effort on your part, investing in an S&P 500 ETF may be your best option.
An S&P 500 ETF is a fund that includes the same stocks as the S&P 500 index itself. This means it includes stocks from 500 of the largest and most successful companies in the U.S. With an S&P 500 ETF, you're instantly investing in hundreds of stocks at once, which takes the guesswork out of picking stocks.
One of the biggest advantages of this type of investment is that it's more likely to recover from market crashes. The S&P 500 itself has been through countless market downturns, yet it's survived every single one of them while still earning positive long-term returns.
If you invest in an S&P 500 ETF, your investments will still experience volatility in the short term. However, it's very likely they'll recover eventually.
How much can you earn with this investment?
Although S&P 500 ETFs are a relatively safe investment, they still pack a punch. By investing consistently and giving your money time to grow, you can earn more than you may think.
Since its inception, the S&P 500 has earned an average rate of return of around 10% per year. That means that while it rarely experiences 10% returns year after year, the highs and the lows average out to around 10% per year over the long run.
Say you have $10,000 to invest right now, and your investments are earning a 10% average annual return. If you were to continue investing $175 per month in addition to your initial $10,000 investment, you'd have roughly $520,000 after 30 years.
It takes time to accumulate hundreds of thousands of dollars in savings, but keep in mind that this type of investment requires very little upkeep. In fact, the more you leave your investments alone, the faster your money will grow.
Regardless of how experienced you are or how much you can afford to invest, it's possible to make money in the stock market. By choosing your investments wisely and giving your money as much time as possible to grow, you can create a portfolio worth hundreds of thousands of dollars or more.
