Becoming a millionaire in the stock market may seem like a lofty goal, but it’s more attainable than you might think.
You don’t need to be rich to generate wealth in the stock market, but you do need the right investments. While there are seemingly endless options to choose from, there’s one, in particular, that legendary investor Warren Buffett strongly endorses: The S&P 500 index fund.
In fact, in Berkshire Hathaway‘s 2020 annual meeting, Warren Buffett explained that when it comes to choosing investments, “for most people, the best thing to do is to own the S&P 500 index fund.”
S&P 500 index funds can be a smart option in many cases, and they could also help you become a stock market millionaire. Here’s how.
Image source: The Motley Fool.
What are S&P 500 index funds?
The S&P 500 itself is a stock market index that includes stocks from 500 of the largest and strongest companies in the U.S. This index is generally considered a strong representation of the stock market as a whole, as the companies within the index span a wide variety of industries.
While it’s impossible to invest in the index itself, you can invest in an S&P 500 index fund. This type of investment aims to mirror the performance of the S&P 500, containing the same stocks as the index.
There are many different funds to choose from, but some of the most popular options include the Vanguard S&P 500 ETF (NYSEMKT:VOO) or the iShares Core S&P 500 ETF (NYSEMKT:IVV).
Historically, the S&P 500 itself has earned an average rate of return of around 10% per year. This doesn’t necessarily mean you’ll earn 10% returns each year. Rather, your investments will have good and bad years, earning returns higher or lower than the average. However, over decades, those highs and lows should average out to around 10% per year.
Perhaps the most appealing aspect of S&P 500 index funds, though, is that they’re maintenance-free investments. You never need to worry about choosing individual stocks or deciding when to buy or sell. All you need to do is invest whatever you can afford, then let the fund do the rest of the work for you.
Reaching $1 million with S&P 500 index funds
This type of investment may not experience explosive growth, but it can help you earn a significant amount of money over time.
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Source: https://www.fool.com/investing/2022/03/06/stock-market-millionaire-warren-buffett-investment/