Putting money into the stock market is one of the most efficient methods to generate income, but the choices of investments can either make or break your portfolio.
Thank you for reading this post, don't forget to subscribe!For numerous investors, exchange-traded funds (ETFs) can be a wise option. ETFs are groupings of securities bundled together into a single investment, and they can provide a simpler and more direct approach to investing compared to acquiring individual stocks.
There is a myriad of ETFs to select from, all with distinct benefits and drawbacks. However, there’s one ETF, specifically, that is owned and highly endorsed by renowned investor Warren Buffett — and it could be an excellent purchase in 2024.
An influential ETF to safeguard your finances
Primarily, Warren Buffett’s portfolio comprises individual stocks. Nonetheless, it does include a type of ETF – the S&P 500 ETF. through its holding company Berkshire HathawayBuffett possesses both Vanguard S&P 500 ETF (VOO 0.28%) and SPRD S&P 500 ETF Trust (SPY 0.28%).
The S&P 500 ETF is a superb choice for individuals who aim to accumulate substantial wealth over time with much less risk and effort than with individual stocks. This form of investment tracks the S&P 500 index itself, and each fund comprises stocks from the 500 largest and most robust companies in America.
Leading companies from tech titans to other corporations are among the best in the S&P 500, such as Apple And Amazon Along with renowned names like Coca-Cola And Procter & Gamble, With numerous dominant stocks, these kinds of ETFs are more likely to rebound from declines and witness long-term growth.
In fact, studies indicate it’s exceedingly difficult to profit from the S&P 500 ETF as opposed to losing money. Crestmont Research analysts examined the 20-year total returns of the S&P 500 to ascertain how frequently the index experienced positive returns.
They discovered that across every 20-year period, the S&P 500 achieved positive total returns. In other words, if you had invested in an S&P 500 ETF at any point in history and held it for 20 years, you would have generated a profit – irrespective of how volatile the market was during that period.
Not only is it low in risk, but the S&P 500 is also incredibly low in maintenance as all the stocks are already chosen for you. By investing in just a single fund, you’ll immediately possess a diversified portfolio filled with robust stocks. All that is required is to hold it for as long as possible.
Establishing long-term wealth in the stock market
S&P 500 ETFs are long-term investments, and with enough time, it’s feasible to amass hundreds of thousands of dollars or more with minimal effort on your part.
Nobody knows how stocks will perform over time, but historically, the market has generated average annual returns of around 10% per year. Even though it’s not possible to achieve 10% returns each year, fluctuations should average out to around 10% annually over decades.
If you were to invest $200 per month in an S&P 500 ETF earning a 10% average annual return, here’s an approximation of how much you could accumulate over time:
| number of years | total portfolio value |
|---|---|
| 20 | $137,000 |
| 25 | $236,000 |
| 30 | $395,000 |
| 35 | $650,000 |
| 40 | $1,062,000 |
Data source: Author’s calculations via investors.gov.
The earlier you commence investing, the easier it will be to amass hundreds of thousands of dollars or more. Despite being unable to invest a large sum presently, time is your most valuable asset. By contributing a few dollars per week, you can earn more than you anticipate over time.
Nevertheless, one drawback to consider is that this investment may only yield average returns. The S&P 500 ETF cannot outperform the market, as it is intended to simply follow the market. If you aim to optimize your earnings, investing in individual stocks may be a more effective strategy.
Warren Buffett has consistently recommended S&P 500 ETFs to other investors, and he possesses two of these funds himself. If you’re seeking a secure investment that necessitates minimal effort on your part, the S&P 500 ETF could be a fantastic buy through 2024 and beyond.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of The Motley Fool’s board of directors. Katie Brockman has positions in the Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Amazon, Apple, Berkshire Hathaway, and the Vanguard S&P 500 ETFs. The Motley Fool recommends the following options: $47.50 calls on Coca-Cola due January 2024. The Motley Fool has a disclosure policy.
Source: www.fool.com
