A great habit for investors to get into is to put money into the stock market every month. By creating this habit, it can eliminate the temptation to try to time the market and worry about when’s the best time to invest. And making it part of your budget and plans every month can increase the likelihood that you’ll stick with it.
If you’re able to set aside $350 each month to invest in an exchange-traded fund (ETF), then that might be sufficient to grow your portfolio to more than $1 million over the long term. Even though the stock market has been doing well and valuations may be high, I’ll show you how that can be possible amid a more conservative annual growth rate.
If you’re putting money into the stock market every month, it’s important to have stocks or ETFs that you feel comfortable with, which effectively become your go-to options. Taking some of the decision-making out of the process so it’s as routine and automatic as practicable will make it easier to follow it and stay on track.
A top ETF that can be a great option for all long-term investors is the Invesco QQQ Trust (NASDAQ: QQQ). Since the fund tracks the top 100 nonfinancial stocks on the Nasdaq index, it takes the guesswork out of determining which are the best growth stocks to buy. And by focusing on the largest companies, it means you also aren’t taking on a big risk by investing in unprofitable businesses or ones with shaky business models. Targeting smaller growth stocks can lead to better returns, but it also exposes you to much more risk.
The largest holdings in the ETF are names that investors will likely be extremely familiar with, including Tesla, Nvidia, Meta Platforms, and other big tech stocks. The fund also charges a relatively modest annual expense ratio of 0.20%.
During the past 10 years, the Invesco QQQ Trust has generated total returns (which include reinvested dividends) of 420% versus 241% for the S&P 500 index. That averages out to a compounded annual growth rate of 17.9%.
The problem is that such a high growth rate may not persist for the long term, especially with the markets being as bullish as they are right now. The S&P 500 index, for example, has averaged an annual return of about 10% over the long run. To be a bit more conservative, let’s assume that the fund will grow at a more modest rate of 9%, which can result in more realistic expectations. And if the returns end up being higher, then that means your balance will also be better than projected.
Here’s what a $350 monthly investment growing at 9% annually could look like over the years.
Year
Portfolio Balance
5
$26,398
10
$67,730
15
$132,442
20
$233,760
25
$392,393
30
$640,760
35
$1,029,625
Under these assumptions, it would take about 35 years for monthly investments of $350 to eventually grow to a value of more than $1 million. But if the returns end up being higher than that or if you can afford to invest some extra money over the years, that can accelerate these gains; this is just an outline of what the portfolio’s balance might look like.
By using more modest growth rates in your assumptions, you can increase the odds of success in your long-term investing plans. If you’re on track to reach your goals at a modest growth rate, then you could blow past them if the rate ends up being higher. And more importantly, you’re less likely to miss those goals by being too optimistic about your future returns.
But by staying committed to the strategy and putting aside money every month into safe long-term investments such as the Invesco QQQ Trust, you can ensure you’re likely to come out much further ahead than if you didn’t follow that strategy.
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $23,324!*
Apple: if you invested $1,000 when we doubled down in 2008, you’d have $42,133!*
Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $420,761!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of November 4, 2024
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms, Nvidia, and Tesla. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.
—
Blog powered by G6
Disclaimer! A guest author has made this post. G6 has not checked the post. its content and attachments and under no circumstances will G6 be held responsible or liable in any way for any claims, damages, losses, expenses, costs or liabilities whatsoever (including, without limitation, any direct or indirect damages for loss of profits, business interruption or loss of information) resulting or arising directly or indirectly from your use of or inability to use this website or any websites linked to it, or from your reliance on the information and material on this website, even if the G6 has been advised of the possibility of such damages in advance.
For any inquiries, please contact [email protected]