Ben Gran, The Motley Fool
5 min read
Making big money in the stock market might be less work than you think. It doesn’t require picking hot stocks, obsessively following the latest financial news, or making rapid-fire day trades. (In fact, day trading is more likely to hurt you.)
Some of the best stock-market wealth-creation accrues to people who “do” the least. People who use a simple strategy. People who stay calm and consistently put more money into their stock investments, month after month, year after year — and then get out of the way and let that money grow for years to come. That’s not an easy thing to do, but it can really pay off.
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Let’s look at one simple strategy to build life-changing wealth with stock market investments, and how the math might look for you.
S&P 500 average annual returns: 10% for 98 years
You don’t have to buy individual stocks to get rich from investing in the stock market. Buying shares of a fund that tracks the S&P 500 index (SNPINDEX: ^GSPC), which is one of the most-watched groups of stocks in America, might be enough. This index consists of the stocks of the 500 largest publicly traded companies in America. When the American economy grows — when companies are making good money and growing, when people are spending at malls and restaurants and online retailers — the S&P 500 tends to do well.
Even when times are bad, the S&P 500 tends to recover relatively quickly, and it makes up for short-term downturns with long-term gains. In the 98 years since 1928, the S&P 500 has delivered average annual returns of roughly 10%. That includes years when it rose and years when it fell hard. That return is not guaranteed in any year, but it’s a reasonable baseline expectation over many years.
Stocks tend to go up in the long run and be the best choice for many people to put their money into for long-term wealth-building.
How this ETF can grow your wealth along with the S&P 500
In the past 10 years, the S&P 500 has done even better than that (already impressive) long-term average. The Vanguard S&P 500 ETF (NYSEMKT: VOO) is a popular exchange-traded fund that lets investors own all the stocks of the S&P 500 index. Just buying VOO and leaving that money alone to grow — which some folks call “VOO and chill” — can be a great investment strategy.
