Cryptocurrency

Cryptocurrency May Not Make You a Millionaire, but This Investment Can – Motley Fool


After a rough summer, cryptocurrency is making headlines yet again as Bitcoin (CRYPTO:BTC) recently reached a record high of $66,000 per token. While some early investors have made a lot of money investing in Bitcoin and other forms of cryptocurrency, it’s still a risky investment.

There are never any guarantees when it comes to the stock market, but crypto is still highly speculative at this point. Although many investors believe cryptocurrency is here to stay, nobody knows for certain how successful it will be over the long term.

This doesn’t necessarily mean that cryptocurrency is a bad investment. If you’re interested in crypto, it doesn’t hurt to invest a small amount of money you can afford to lose. However, it’s best to avoid going into it under the assumption that it will make you a millionaire.

There’s one type of investment, though, that can make you a millionaire, and it’s much less risky than cryptocurrency: S&P 500 ETFs.

Person holding a handful of bills.

Image source: Getty Images.

Why invest in S&P 500 ETFs

An S&P 500 ETF is an investment that includes all the stocks within the S&P 500 index. These stocks are from some of the largest and most stable companies in the U.S., such as Apple, Amazon, and Microsoft.

Although all investments carry some degree of risk, S&P 500 ETFs are one of the safer options. These funds are designed to follow the stock market as a whole, and the market has historically earned positive returns over the long run.

This doesn’t necessarily mean you’ll earn positive returns each and every year. The stock market experiences short-term volatility, so while some years you may earn above-average returns, other years you may see losses. However, over the course of decades, those highs and lows will likely average out to a positive number.

^SPX Chart

^SPX data by YCharts.

Despite its relatively low level of risk, the S&P 500 ETF is also a powerhouse investment. With the right strategy, it’s possible to earn well over $1 million.

Becoming a millionaire with S&P 500 ETFs

The more time you allow your money to grow, the easier it will be to reach millionaire status with S&P 500 ETFs. By starting to invest now, you won’t need to save as much each month to accumulate $1 million or more.

Historically, the S&P 500 itself has earned an average rate of return of around 10% per year. Again, this doesn’t necessarily mean you’ll earn 10% returns every single year, but if you keep your money invested for decades, your annual returns will likely average out to roughly 10% per year.

Let’s say, for example, you can afford to invest $300 per month in S&P 500 ETFs. Assuming you’re earning a 10% average annual return, here’s how much you could accumulate over time:

Number of Years Total Savings
10 $57,000
20 $206,000
30 $592,000
40 $1,593,000

Source: Calculations by author via Investor.gov.

The more you’re able to save each month, the more you’ll earn over time. For instance, if you were able to invest $500 per month rather than $300 per month, you’d reach $1 million in just over 30 years. After 40 years, you’d have nearly $2.7 million saved.

Where to get started

If you’re ready to get started investing in S&P 500 ETFs, you have plenty of options to choose from. Most S&P 500 ETFs are similar in many ways, and some of the most popular funds include:

Cryptocurrency may be the trendiest new investment, but it’s not right for everyone. While you can potentially make a lot of money with crypto, it can also be incredibly risky. S&P 500 ETFs are not only safer, but you also have a much better chance of building wealth over time.

 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.





READ SOURCE

Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.