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Officially, we have entered a new bull market.of S&P500 (^GSPC 0.29%) It hit a new all-time high last week and is now up nearly 36% from its October 2022 low.
If you’ve been holding back on investing, now might be the perfect time to jump back into it. There’s no guarantee that stocks will continue to rise, but if you wait too long before buying, you could miss the early stages of this bull market. market.
However, it’s important to make sure you’re investing in the right place. Whether you’re new to investing or want a hassle-free investment with a very high chance of profit in the long run, there’s one index fund you should buy right now. S&P500 index fund.
The best index fund for your portfolio
S&P 500 Index Funds are investments that track the S&P 500 Index itself. It includes the same stocks as the index and aims to reflect their performance over the long term.
The S&P 500 includes stocks of 500 of America’s largest and strongest companies across a variety of industries. By investing in just one index fund, you own shares in every stock in the index. This allows you to instantly create a diversified portfolio with little effort.
This type of investment is one of the safest and most reliable investments. The S&P 500 has a track record of recovering from decades of volatility, so no matter what the future holds for the market, S&P 500 index funds are likely to recover.
^SPX data by YCharts
In fact, research shows that it’s almost impossible to lose money on this investment as long as you have a long-term outlook. Analysts at Crestmont Research looked at the long-term performance of the S&P 500 Index and found that every 20-year period in the index’s history ended with a positive total return.
In other words, if you invested in an S&P 500 index fund at any point in history and simply held it for 20 years, you would have made a profit no matter how volatile the market was at that time.
build wealth in the stock market
Despite being relatively safe, S&P 500 index funds can also help you generate significant wealth over the long term.
Historically, the market itself has averaged annual returns of about 10% per year. This means that while you’re unlikely to get a 10% return in a single year, your annual return averages out to be about 10% a year over several decades.
If you earn an average annual rate of return of 10% and are investing, say, $200 per month, here’s roughly how your savings will grow over time.
| years | Total portfolio amount |
|---|---|
| 20 | $137,000 |
| twenty five | $236,000 |
| 30 | $395,000 |
| 35 | $650,000 |
| 40 | $1,062,000 |
Data source: Author calculations via investor.gov.
When investing in the stock market, it’s important to keep a long-term outlook, and the more time you can give your money to grow, the more profits you can potentially make. If you haven’t started investing yet, now is the perfect time to start.
Choosing the right S&P 500 index fund
Most S&P 500 index funds are similar because they track the same index and contain the same stocks. However, the three most popular options include: Vanguard 500 Index Fund Admiral Share (VFIAX 0.22%), Schwab S&P 500 Index Fund (SWPPX 0.22%)and Fidelity 500 Index Fund (FXAIX 0.22%).
Both of these index funds have low fees, making them a more affordable way to invest. Fidelity Funds’ expense ratio is just 0.015%, Schwab’s is slightly higher at 0.02%, and Vanguard’s is 0.04%. That means you’ll pay $1.50, $2, or $4 in fees each year for every $10,000 in your account.
While there is no single right way to invest, S&P 500 index funds can be a low-cost, low-effort way to build wealth in the stock market. By investing as much as you can afford and taking as much time as possible to grow your money, you could potentially earn hundreds of thousands of dollars (or more) over the long term.
Katie Brockman has a position in the Vanguard S&P 500 ETF. The Motley Fool owns a position in and recommends the Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
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