(Maurie Backman)
People who are very familiar with the stock market often manage to build strong portfolios that reward them over time with strong returns. But beating the market isn’t your only path to millionaire retirement. Even if you know very little about investing and aren’t comfortable choosing stocks for your long-term portfolio, there is a simple step you can take to grow a lot of wealth in time for your years. of retirement.
Rely on the vast market
Choosing individual actions can be intimidating. You need to dig into the finances of these companies, determine the challenges and risks they face, and determine if their debt load is reasonable.
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Certainly, if you are willing to invest the time in learning how to control a stock, you could be rewarded with a portfolio that outperforms the performance of the broader stock market. But if this is something that makes you nervous, there is another solution: load on S&P 500 index funds.
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Index funds are funds that are passively managed with the aim of matching the performance of the benchmark index to which they are linked. Some index funds aim to perform as well as the S&P 500, which is an index made up of the 500 largest publicly traded companies.
When we talk about the performance of the stock market (as in “the market was up today” or “the market has plunged”) we are often talking about the movements of the S&P 500 itself. This is because this index is generally viewed as a measure of the evolution of the market as a whole. So it makes sense to put your money in the S&P 500, especially if the idea of picking individual stocks doesn’t suit you.
Between 1957 and 2021, the S&P 500 rewarded investors with an average annual return of 10.67%. Now imagine that you put your long-term savings in S&P 500 index funds over the next 40 years.
If you want to be a little conservative, you can say that your portfolio will offer an average annual return of 8%. Invest $ 600 per month and you will end up with a nest egg worth over $ 1.8 million. Earn $ 1000 per month and you plan to end your career with $ 3.1 million.
Don’t spin your wheels
If you have an appetite for stock picking, you might be successful in building a portfolio that outperforms the S&P 500. But if it’s not in your wheelhouse, loading S&P 500 index funds is a very reasonable and reasonable alternative. viable.
Plus, if you’re saving for your retirement under an employer-sponsored 401 (k) plan, you’re not even allowed to choose individual stocks to invest in. On the contrary, you will usually be limited to a number of different funds in which to invest your money. But 401 (k) s will usually offer at least one index fund that tracks the S&P 500, so look for that option in your plan if that’s a path you want to take.
Investing in the wider market is also a great way to gain some peace of mind. So there is no need to stress about picking the right actions when you can get away with it.
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