Investing in the stock market can be challenging. There are seemingly endless investment options, the market is prone to volatility, and choosing the wrong stocks could devastate your long-term savings.
Fortunately, there are ways to grow your money with very little effort. With these three strategies, you can maximize your potential earnings while limiting your risk.
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1. Earn your employer match
Contributing to your 401(k) is one of the easiest ways to invest, and maxing out your employer match can help you save more than you might think.
Not all employers offer matching 401(k) contributions, but if your plan does, it's wise to take full advantage of this perk. The average match is around 3.5% of a worker's wages, according to data from the Bureau of Labor Statistics. In other words, for every dollar you invest in your 401(k), your employer will match it up to 3.5% of your salary.
This will instantly double your money, and your savings can accumulate substantially over time. Say, for example, you earn $60,000 per year and your employer will match up to 3.5% of your salary, or $2,100 per year. Let's also say you're earning a modest 8% average annual return on your investments.
If you consistently earn the full match, that $2,100 per year will amount to around $238,000 after 30 years. When you include your own contributions as well, you'd have more than $475,000 in total, all other factors remaining the same.
2. Invest in S&P 500 ETFs
Some investors enjoy picking stocks and researching different companies, while others would rather take a hands-off approach to investing. If you fall into the second category, index ETFs may be a fantastic option.
Index ETFs are collections of stocks bundled into a single investment, and they track particular stock market indexes like the S&P 500. If you were to invest in an S&P 500 ETF, you'd be investing in all the stocks within the S&P 500 itself.
Given enough time, you can easily double your money with this type of investment. Historically, the S&P 500 has earned an average rate of return of around 10% per year since its inception. This means that although the index has experienced significant volatility over the years, the record highs balance out the slumps, averaging out to returns of around 10% per year.
So if you invested $10,000 today, how long would it take to double your money? If you didn't make any additional contributions and earned a 10% average annual return, you'd reach $20,000 in savings within around 8 years.
Keep in mind, too, that S&P 500 ETFs are a "set it and forget it" type of investment. So all you need to do is invest your money, then sit back and wait.
3. Hold your investments for as long as possible
While some investors use short-term strategies to make money (take day trading, for instance), those tactics can be extremely risky. And oftentimes, they're more similar to gambling than true investing.
A surefire way to generate wealth is to buy solid investments and hold them for the long term. If the companies you invest in are strong, they're likely to grow over time. As they grow, their stock prices should go up as well, and your portfolio will increase in value.
By investing for the long term, you also won't need to worry about stock market volatility. Strong companies are more likely to survive market turbulence, and their stock prices should recover. When you fill your portfolio with strong stocks, you can rest assured that your investments will bounce back no matter what the market does.
Investing in the stock market can be intimidating. But with the right strategy, you can easily double your money and send your savings to the moon.
