You don't have to be an expert investor to make a lot of money in the stock market. In fact, even if you know next to nothing about investing, it's possible to build long-term wealth without breaking the bank.
Investing in the stock market is a long-term strategy. It can take decades to see significant earnings, but the wait is worth it. By investing just $100 per month, you can eventually build a portfolio worth hundreds of thousands of dollars.
Image source: Getty Images.
Choosing the right investment
The more time you have to invest, the more you can potentially earn. This means it's important to start investing as early in life as possible. Even if you can't afford to invest much, investing even a little each month is better than doing nothing.
Another factor to consider is where you want to invest your money. You have seemingly endless options when deciding where to invest, and that can be overwhelming. The good news is that there's one option that can keep your money safer while helping you earn as much as possible: S&P 500 index funds.
An S&P 500 index fund includes stocks from 500 of the largest publicly traded companies in the U.S., spanning a wide variety of industries. This limits your risk, because you're spreading your money across hundreds of different stocks.
A few of the most popular S&P 500 index funds include:
- Vanguard S&P 500 ETF (NYSEMKT: VOO)
- iShares Core S&P 500 ETF (NYSEMKT: IVV)
- SPDR S&P 500 ETF (NYSEMKT: SPY)
S&P 500 index funds are relatively safe investments, because they follow the stock market as a whole. While the market has experienced its ups and downs, it's generated positive returns over the long term.
By investing in S&P 500 index funds and staying invested for as long as possible, you could potentially make a lot of money.
Getting rich in the stock market
It's possible to see substantial earnings with S&P 500 index funds, but just how much could you earn by investing $100 per month?
Since its inception, the S&P 500 has experienced an average rate of return of around 10% per year. Say that you're investing $100 per month while earning a 10% annual return. Here's approximately how much you'd have saved over time:
|Number of Years||Total Savings|
Data source: author.
Depending on how much time you have to invest, it's possible to accumulate several hundred thousand dollars in total savings.
Of course, it can be tough to wait a few decades to see these types of earnings. But $100 per month comes out to just over $3 per day. Other than investing in the stock market, there are very few ways to accumulate hundreds of thousands of dollars in savings for just $3 per day.
The stock market can be daunting, especially if you're new to the investing world. But it's one of the most effective ways to generate long-term wealth. By investing just a few dollars per day, you can earn more than you may think.
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