The S&P 500 is one of the most reliable wealth-building mechanisms the world has ever seen. It’s beautifully simple: an index of the U.S.’s 500 most prominent companies at any given time. The companies in the S&P 500 have changed over the years, but the index’s long-term results — mind-blowing wealth — remain the same. A $100 investment made in 1950 would be worth over $32,000 today, and that doesn’t even factor in dividends.
It’s a tip of the cap to America’s capitalist economy, which has grown to become a global financial juggernaut despite the U.S. being one of the newer countries on the world stage.
The best part? Anyone can invest in the S&P 500 through exchange-traded funds like the SPDR S&P 500 ETF Trust (NYSEMKT: SPY).
Once you know how and why, you’ll realize it’s the most no-brainer investment you can make with less than $1,000.
A brief list of step-by-step instructions for building wealth:
Building wealth with the SPDR S&P 500 ETF Trust is simple.
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You buy shares and then wait.
No, really. It’s that easy.
Ok, there’s a little nuance. Depending on your budget, you may buy a whole share of the ETF, which currently costs about $550, or break it up into smaller dollar-based purchases if your brokerage allows fractional shares. Whether you invest your $1,000 as a lump sum or break it up (using dollar-cost averaging) is up to you. Either way, you’re very likely to make money over time.
Time in the market is everything
Many people can’t believe how simple investing can be and let emotions and indecision mess them up. Just look at all the negativity in the media! Watch the news on any given day, and you’ll find a half-dozen reasons not to buy stocks right now. But statistically speaking, now is the best time to invest.
A study by Schwab analyzed market timing by examining the outcomes of two hypothetical people who invested annually for 20 years. Person A invested at the S&P 500’s lowest price each year (super lucky), while Person B invested at the highest (super unlucky). Over 20 years, the super unlucky investor still ended up with over 81% of the money of the person who invested perfectly!
Remember, that’s a worst-case scenario with impossible odds. The same study showed that someone who invested randomly ended with almost the same final result as the super-lucky investor.
What’s the moral of the story here? Simply investing for as long as possible is the biggest factor in how well you do. You could be impossibly lucky in timing your investments, and it would still make little difference in your long-term results.
You can do even better with your $1,000
During the past 50 years, the S&P 500 has averaged 10% annual returns. So, over time, your investment could double every seven years or so. That means your $1,000 could grow to $32,000 over the next 35 years! However, you could do even better. Regularly adding savings can pour gas on the fire and supercharge your long-term wealth.
Consider this.
Suppose you invest $1,000 today and then add $100 monthly for 35 years. That’s like eating fast food for dinner one less time each week. Assuming the same returns, your portfolio would grow to over $412,000!
The cool thing about the S&P 500 is that it’s so consistent over time that it doesn’t need flashy returns to do big things. It’s remarkably dull, yet most professional fund managers fail to outperform it over the long term. Investing in the SPDR S&P 500 ETF Trust is never a bad idea, so put that $1,000 to work and try to find a way to consistently build on it while time and America’s most prominent companies work hard to make you wealthy.
Should you invest $1,000 in SPDR S&P 500 ETF Trust right now?
Before you buy stock in SPDR S&P 500 ETF Trust, consider this:
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Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $652,404!*
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Charles Schwab is an advertising partner of The Ascent, a Motley Fool company. Justin Pope has no position in any of the stocks mentioned. The Motley Fool recommends Charles Schwab and recommends the following options: short September 2024 $77.50 calls on Charles Schwab. The Motley Fool has a disclosure policy.
1 No-Brainer Wealth-Building ETF to Buy Right Now for Less Than $1,000 was originally published by The Motley Fool
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