Hollywood's biggest night, the Oscars, is here. As celebrities prepare to walk the red carpet, investors can prepare their stock portfolios to maximize their earning potential.
If you're a beginner investor, it can be daunting to get started. There are thousands of stocks to choose from, and seemingly unlimited mutual funds, exchange-traded funds (ETFs), and other types of investments.
Fortunately, it's easier than you may think to get started investing. And there's one type of investment that wins the award for "Best Beginner Stock."
Image source: Getty Images.
The best investment to get started
If you're just beginning to invest in the stock market and want to avoid the headaches that come with choosing individual stocks, buying and selling investments, and doing loads of research, your best bet is to invest in an S&P 500 ETF.
An S&P 500 ETF is a collection of stocks that mirrors the S&P 500. In other words, it contains all the same stocks as that particular stock market index. The S&P 500 includes hundreds of the largest, strongest companies in the U.S., making it one of the safer investments available.
Another advantage of this type of investment is that it's more protected against market volatility. Market downturns are inevitable, and nobody can escape them. However, S&P 500 ETFs are more likely than some other types of investments to recover from even the worst market crashes.
In the last 20 years alone, the S&P 500 has endured a significant amount of volatility -- from the dot-com bubble burst to the Great Recession to the crash spurred by the COVID-19 pandemic. Yet despite all the turbulence, the S&P 500 has recovered stronger than ever.
If you're a new investor, the idea of experiencing market crashes can be intimidating. But by investing in an S&P 500 ETF, you can rest easier knowing your money is more protected.
Making money with S&P 500 ETFs
Perhaps the biggest advantage of investing in an S&P 500 ETF is that you can make a lot of money with next to no effort.
S&P 500 ETFs require zero upkeep or maintenance, which makes them a smart option for beginners and those who don't want to spend a lot of time researching stocks or managing their portfolio.
With this type of investment, all you need to do is invest consistently, then sit back and let the fund do the rest of the work for you. Given enough time, you could potentially become a millionaire investor with S&P 500 ETFs.
Since the S&P 500's inception, it has earned an average rate of return of around 10% per year. Say you're investing $200 per month in an S&P 500 ETF while earning a 10% annual return. Here's approximately how much you'd have saved over time:
| Number of Years | Total Savings |
|---|---|
| 5 | $15,000 |
| 10 | $38,000 |
| 20 | $137,000 |
| 30 | $395,000 |
| 40 | $1,100,000 |
Source: Author's calculations
Patience is key to making a lot of money with S&P 500 ETFs, and the more time you have to invest, the more you can potentially earn.
Finding the right investments can be tricky, but investing in the stock market is one of the best ways to build wealth over time. By investing in S&P 500 ETFs, you can take home the award for "Most Successful New Investor."
10 stocks we like better than Walmart
When investing geniuses David and Tom Gardner have an investing tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Walmart wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Stock Advisor returns as of 2/1/20
The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
