*NOTE: I am not a financial advisor.
The stock market can be a scary place to invest your money. With all the analysts out there from different companies calling all record highs “improbable” and that the stock market must come crashing down 20%, 30% or even 40%. Reading this as a first time investor can be extremely worrisome and can easily push you away from dropping a single penny in the stock market. However, I truly believe that with the right mindset, you can consistently make money in the stock market and will come out on top. You will not have to worry about investing your money and losing it; You will not have to try and time the market. This method has been highly recommended by many and it has been proven over the long haul to be a safe and steady way to increase your wealth.
What Am I Really Talking About Here?
The style of investing I am talking about here is investing in the S&P 500 by investing in index funds, which tracks the market. The S&P 500 has returned 10% every year, or 7% every year, adjusted for inflation, over the history of its existence. This does not mean that the S&P 500 will yield 7% every year, but rather, this year it can return 1% and the next year 10%. Over a long period of time, the average is 7% adjusted for inflation. This will be “boring” and not interesting by any means, but it is a time tested method where we, as the investors, can come out on top without much work.
The issue with this type of investing is that the 10% growth does not equate to mansion-type money. However, it is a great way to grow one’s wealth through a reliable source. Investing in the market is basically a way to invest within the United States; When you invest in the U.S. market, you are investing in the United States. This is also a great way to protect your money from inflation, which constantly devalues your money.
The easiest way to invest in the S&P 500, as a whole, rather than buying a share of the 500 companies held within the index, is to buy index funds set and created by companies such as Charles Schwab and Vanguard. I mention these two because they are the most popular and mentioned around me during the past couple years. They also have a low expense ratio, typically under 0.04%, which is ideal to keep as much of the earnings as possible to let your money continue to compound.
My Honest Opinion
This is the easiest way to invest and grow your money with little to no effort. Being able to keep your portfolio growing at a respectable rate over time while keeping the money in a relatively safe place is second to none. There are other methods of investing such as growth investing and dividend investing, by far this is one of the easiest and effortless ways to go about growing your investment portfolio. If you are new and interested in opening an account, you can take a look at our breakdown of brokerages that we are familiar with here. This will help you identify some key standout functions.
I am not a financial advisor, but it is something that is tried and true. I have allocated a portion of my own portfolio for index funds and it is incredible. I bought Schwab’s S&P 500 index fund in November prior to the 2020 stock market crash, and now in August, the index fund is still up 15%. I did not buy any even at the bottom of the market in late march, but still being up 15% is amazing. Give this method a try and see just how easy it is for you to invest and grow your money effortlessly. Remember, this does not ensure every year your portfolio will grow 7%, but it does do that over a long period of time. So set it, constantly continue to contribute, and do not worry about the ups and downs in the short term. But until next time…
We appreciate y’all letting us be a part of your Break Time.
Checking out, Kenny