ETFs
Do you have $200 a month? This Warren Buffett ETF Could Turn It Into $650,000 With No Effort
The right investment can boost your savings.
If you’re ready to start investing in the stock market, congratulate yourself. Investing remains one of the most effective and accessible ways to earn money over time, and getting started is the first step toward creating life-changing wealth.
However, choosing the right investments can be intimidating. There are countless stocks and funds to choose from, and if you invest in the wrong places, it could cost you.
Fortunately, some investments fit almost any portfolio – and you don’t have to be an expert to see significant gains over time. There’s one fund in particular that not only got Warren Buffett’s seal of approval, but could help you turn $200 a month into $650,000 or more by barely lifting a finger.
Image source: The Motley Fool.
Maximize your income with ETFs
Exchange traded funds (ETF) can be a fantastic option for both beginner and advanced investors. An ETF is a collection of securities grouped into a single investment. So, by investing in a single stock of an ETF, you will instantly own a stake in many different stocks at once.
Some ETFs are broader and track multiple sectors or even the stock market as a whole. Others are more specialized, including stocks from specific sectors or smaller subsets of the market.
One of the most popular types of funds is the S&P 500 ETF. This fund tracks the S&P500 (^GSPC 0.70%) and includes 500 large cap stocks in a wide variety of industries. The S&P 500 is one of the leading benchmarks for the overall market, and while you can’t invest in the index itself, this ETF is as close as you can get.
Even Warren Buffett swears by this type of investment, and through his holding company Berkshire Hathawayhe himself owns two funds: the Vanguard S&P 500 ETF (VOO 0.68%) and the SPDR S&P 500 ETF Trust (TO SPY 0.66%).
In 2008, Buffett even made a $1 million bet that an S&P 500 fund could outperform a group of actively managed funds over time. Not only did he win that bet, but he also beat the competition. His investment generated a total return of nearly 126% over 10 years, compared to an average return of just 36% for the five hedge funds over that period.
Benefits of an S&P 500 ETF
The S&P 500 is a simple, straightforward investment that can help you make a lot of money over time with minimal effort.
Because all of the stocks in the fund are chosen for you, this type of investment requires much less research than purchasing individual stocks. It’s also much more cost-effective, because you can build a diversified portfolio with a single fund instead of buying 20 to 30 separate stocks.
The S&P 500 ETF is also a fantastic long-term investment. It works best when left alone for several years or, ideally, several decades. All you have to do is invest consistently and hold on to your investment for as long as possible, and the fund takes care of the rest for you.
Turn $200 per month into $650,000 or more
There are never any guarantees in the stock market and no one can say with certainty what the return on an investment will be. But historically, the market itself has gained a place average rate of return of around 10% per year.
It is very unlikely that you will get a 10% return year after year. But over the past few decades, annual market returns have averaged about 10% per year. At this rate, if you were to invest $200 per month, here’s approximately how it would compound over time:
| 20 | $137,000 |
| 25 | $236,000 |
| 30 | $395,000 |
| 35 | $650,000 |
Data source: Author’s calculations via invest.gov.
To reach $650,000 in total savings, you’ll need to invest consistently for about 35 years. If you can afford to invest longer or contribute more per month, you could significantly increase your income.
For example, giving your money just five more years to grow could take you from $650,000 to a whopping $1.062 million, all other factors remaining the same. Of course, not everyone has 40 years to save, but the earlier you start investing, the more you can potentially earn (with much less effort).
Investing in an S&P 500 ETF can be a fantastic way to build long-term wealth with little effort, whether you’re new to the stock market or just prefer a no-fuss investment. By investing as much as you can afford each month and giving your money enough time to grow, you’ll be on your way to generating hundreds of thousands of dollars or more.