Building a million-dollar retirement fund may seem like a lofty goal, but it is achievable -- even if you're not an investing expert.
In fact, you don't need to know much about the stock market at all to start generating wealth. While choosing the right investments is key to growing your savings, it's easier than you might think to build a strong portfolio. By investing in this one ETF, you could potentially be a stock market millionaire by the time you retire.
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A powerhouse ETF
An ETF, or exchange-traded fund, is an investment that includes dozens or even hundreds of stocks. By investing in just one ETF, you have a small stake in all the companies within the fund.
While there are countless ETFs to choose from, one of the most powerful is the S&P 500 ETF. This fund tracks the S&P 500 index itself, which means it includes the same stocks as the index and aims to mirror its performance.
The S&P 500 contains 500 of the largest and strongest companies in the U.S. -- including household names like Amazon, Apple, and Tesla. By investing in this type of ETF, you'll own a stake in all of these stocks.
Because S&P 500 ETFs include powerhouse companies, this type of fund is likely to see consistent growth over time. That doesn't mean it won't take a hit during market downturns. But historically, the index has always recovered from corrections and crashes, earning positive average returns over decades.
Reaching millionaire status
Nobody knows how the market will perform in the short term. However, its long-term performance is more predictable.
Historically, the S&P 500 has earned an average annual return of around 10% per year. This means that all of its yearly highs and lows have averaged out to around 10% per year over many decades. By investing a little each month and giving your money as much time as possible to grow, it's possible to earn $1 million or more with this ETF.
Say, for example, your goal is to reach $1 million, and you're earning an average rate of return of 10% per year. Here's how much you'd need to invest each month depending on how many years you have to save.
| Number of Years to Invest | Amount Invested per Month | Total Savings |
|---|---|---|
| 40 | $200 | $1.062 million |
| 35 | $325 | $1.057 million |
| 30 | $525 | $1.036 million |
| 25 | $900 | $1.062 million |
| 20 | $1,500 | $1.031 million |
Data source: Author's calculations via Investor.gov
The longer you wait to begin investing, the more you'll need to save each month to reach your goal. It's wise, then, to start now -- even if you can't afford to invest much.
Investing in the stock market can be intimidating, especially when the market is volatile, but it's one of the easiest and most effective ways to build wealth over time. By investing in the right places, contributing as much as you can afford each month, and giving your money time to grow, you'll be on your way to becoming a millionaire retiree.
