A lot of people can’t find their way to a profitable investment. They got in without knowing the right path and strategy to follow. In the end, they lose out or, luckily, break even.
If you don’t know about S&P 500, it’s an index fund that tracks the stock performance of the 500 best companies listed on the United States stock market. They basically add and remove a stock based on how well it’s doing and potential future movement. Your 10,000-dollar investment in the fund means that you are buying a small portion of 500 different companies.
But here’s the question; why should you consider investing in the S&P 500? With S&P 500, the risk has been minimized for you compared to individual growth stocks. Assuming you have a hundred thousand in a growth stock like amazon, if anything should happen and the stock hits bottom, your portfolio will go down. But with an index fund like the S&P 500, if a company has a red year, the others would probably go up. The diversification allows for balance and so you won’t have to lose much because a single stock performs poorly. This gives you a chance to gain from your investment with a highly reduced risk.
According to Tradethatswing, the average annual return of the S&P 500 with reinvested dividends over the past 100 years is marked at around 10.22 per cent.
Let’s see how much your investment will grow over time. If you invest 100,000 dollars in the S&P 500 today, you will have about 268,000 dollars in the next ten years, 723,000 dollars in twenty years’ time, 1,945,000 dollars in thirty years, and above five million dollars in forty years.
If this makes a little bit of sense, your next question might be, “how can I invest a hundred thousand dollars?”
The S&P 500 is a lower-risk means of investment that you can channel toward your retirement. Assuming that you need a million dollars to live after you stop working, a hundred thousand dollars is enough to realize your dream.
Let’s take a look at how long it will take you to reach a hundred-thousand-dollar investment goal in the S&P 500 at different rates of contribution. Suppose you invest 100 dollars every month; you will hit your goal in an estimated time of 23 years. What if you raise your monthly investment to 200 dollars per month? It will take you around 17 years to hit your target. Investing 300, 400, 500, or 1000 dollars every month will take about thirteen, eleven, ten, and six years respectively.
Three Simple Steps That Can Help You Get to That Investment Goal Faster
Cut Your Expenses
This is a very crucial secret not just for investing in the S&P 500 but for financial success in general. You need to be willing to set aside a portion of your income for your financial future. At a time when your earnings are not even enough for all your needs, this might seem difficult. But it’s not as you might think. Track your expenses to see where you are spending unnecessarily and even find ways to cut down on the ones that are necessary. You might start walking instead of taking your car or get a roommate to cut your home expenses in half. Remember, this is a short time sacrifice so you can live the way you like in the near future.
Leverage on 401(K) Match
The chance that your company offers a 401k match is very high. They are ready to give you an extra amount besides your salary provided that you will invest it towards your retirement. Assuming you invest 5 percent of your salary, your company can match up and invest an equal amount for you. Some other times, they only invest a fixed amount for you. All you need is to direct your investment toward the S & P 500 index fund. It’s a great way to apply the advantage of free money. You’re literally growing your portfolio with someone else’s money so you can reach your goal faster. What absolute financial intelligence.
Increase Your Income
It’s easier to make a hundred thousand dollars than save it. As much as it’s important to cut down your expenses and invest the rest, you can only cope with that lifestyle for a short time. You need to find ways to increase your skills and, consequently, your income. That will put you in a more comfortable living position and have more money to invest. You can start a side hustle, get a new job with higher pay, or get an extra job out of work hours.
If you find this blog valuable, kindly hit the like button and share it so others can gain investment ideas and skyrocket their way to financial success. Remember to also signup to our newsletter so you won’t miss out on any of our blogs. Kindly check out also this related post like “5 golden rules of investing successfully“. Which of these methods are you using right now? Let’s know in the comment section.
Recommended books for further reading:
- Smarter Investing: Simpler Decisions for Better Results
- How to Make Money in Stocks: A Winning System In Good Times And Bad
- The Barefoot Investor: The Only Money Guide You’ll Ever Need
- Building a story brand by Donald Miller
- Positive intelligence by Shirzad Chimene
If you are looking to open an investment account, follow the links below:
(‘68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.)