Becoming a stock market millionaire may seem like a lofty goal, but it's more attainable than you might think -- as long as you have the right strategy.
Exchange-traded funds (ETFs) are a low-maintenance type of investment, and they require very little effort on your part. With the right fund, you could potentially accumulate $1 million or more over time. Here's how.
The right ETF to grow your savings
There are countless ETFs to choose from, and the right fund for you will depend largely on your tolerance for risk and investing preferences. But there's one, in particular, that is a fantastic option for many investors: The S&P 500 ETF.
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An S&P 500 ETF follows the S&P 500 index itself. Each fund includes stocks from 500 of the largest companies in the U.S., and when you own this type of ETF, you'll own a stake in all 500 of those stocks.
S&P 500 ETFs are also safer than many other types of investments. Because they only contain stocks from the largest and most stable companies, they're far more likely to recover from periods of market volatility.
In fact, over the last two decades alone, the S&P 500 has faced the dot-com bubble burst, the Great Recession, the COVID-19 crash in 2020, and this year's bear market. Despite everything, though, it's still up roughly 170%.
In other words, an S&P 500 ETF is extremely likely to recover from downturns. If you're worried about keeping your money safe in a recession or bear market, this may be the right investment for you.
Becoming a millionaire with the S&P 500 ETF
Although they're relatively safe investments, ETFs can also help you make a lot of money over time.
Historically, the S&P 500 itself has earned an average rate of return of around 10% per year. While you're unlikely to earn 10% returns each and every year, the annual highs and lows should average out to around 10% per year over time.
Exactly how long it takes you to accumulate $1 million will depend significantly on how much you invest each month. The more you invest, the faster your savings will build.
Assuming you're earning a 10% average annual return, here's approximately how long it will take to reach $1 million depending on how much you invest each month.
| Number of Years | Amount Invested per Month | Total Savings |
|---|---|---|
| 40 | $200 | $1.062 million |
| 35 | $325 | $1.057 million |
| 30 | $525 | $1.036 million |
| 25 | $850 | $1.003 million |
| 20 | $1,500 | $1.031 million |
Data source: Author's calculations via Investor.gov.
While waiting decades to build a $1 million portfolio may not sound ideal, keep in mind that S&P 500 ETFs are passive investments and require almost no effort on your part.
You won't need to do any research or make any investing decisions about individual stocks. All you have to do is invest as much as you can afford each month and give your money time to grow. Even if you have no stock market experience, an S&P 500 ETF can help make you money.
The key to successfully building wealth in the stock market is to start early. The sooner you begin investing, the less you'll need to contribute each month to reach your goal. By starting now, you'll be well on your way to becoming a stock market millionaire.
