It would be more than fair to say that 2022 was a tricky year for investors. Not only did the broad market take a tumble, but rumblings about an impending recession are leaving many investors feeling iffy going into 2023.
Meanwhile, the start of a new year is a great time to reassess your investing strategy -- or devise one if you're fairly new to buying stocks. But this year's economic and market backdrop make that more challenging than usual.
That's why it pays to focus on one specific type of investment for 2023. It's one that doesn't require a ton of research, and it may be a suitable option whether you're looking for assets for a retirement plan or a taxable brokerage account.
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Turn to the broad market
It's a tough time to be buying stocks because investors don't know where the market is headed over the next 12 months. The reality is that if you're investing for a far-off goal, like retirement, you don't need to stress about whether the market improves in 2023 or sinks even further. But still, during periods of turbulence, identifying the right companies to put money into can be stressful. And that's what makes S&P 500 index funds a good choice.
The S&P 500 consists of the 500 largest publicly traded companies. It doesn't include every publicly traded company, but in general, it's used as an indicator of how the broad market is doing.
Meanwhile, index funds are passively managed funds whose goal is to track different benchmarks and match their performance. There are different types of index funds you can invest in, but S&P 500 index funds really do give you great access to the broad market. And that could take a lot of guesswork out of the equation at a time when investors could be in for another year of upheaval. Not only that, but S&P 500 index funds could make it possible to build an impressive amount of wealth over time.
Can you make millions with S&P 500 index funds?
Your goal may be to grow your portfolio into millions of dollars. And the good news is that it's possible to do so even if you stick to S&P 500 index funds.
Since its inception, the S&P 500 has delivered an average return of a little under 12%. So even if you want to be more conservative and assume that your portfolio will deliver an average yearly 8% return, if you invest $650 a month over 40 years, you'll end up with just over $2 million. And that's without having to spin your wheels researching individual stocks and tracking their performance.
Now this isn't to say that you won't outperform the S&P 500 over time if you assemble a mix of individual stocks. But if you don't feel comfortable hand-picking stocks, or you simply don't want to do the work, then S&P 500 index funds are a good option to fall back on. And you might especially want to rely on the broad market at a time when economic conditions are turbulent.
