Whereas it may be tempting to spend money on short-term shares with the potential for explosive development, these investments will be extremely dangerous. A safer (and extra worthwhile) possibility is to spend money on strong long-term investments which can be extra more likely to see constant development over time.

There is no one-size-fits-all funding that shall be proper for everybody, however there’s one ETF that I plan to carry for so long as doable: the Vanguard S&P 500 ETF (NYSEMKT: VOO).

An S&P 500 ETF is a fund that tracks the S&P 500 index itself, that means it consists of the identical shares and mirrors its efficiency. The index consists of shares from 500 of the most important corporations within the U.S., together with many family names like Amazon, Apple, and Tesla.

Maybe the strongest function of an S&P 500 ETF is its capacity to outlive durations of market volatility. No funding is proof against short-term market downturns, however the S&P 500 has a protracted historical past of recovering from crashes, bear markets, recessions, and every part in between.

As a result of the Vanguard S&P 500 ETF tracks the index itself, it should mirror its efficiency. Which means if we face a deeper recession or the market crashes, it is extraordinarily possible this ETF will recuperate finally.

Regardless of being a comparatively secure funding, S&P 500 ETFs have the potential for substantial returns over time.

Traditionally, the index itself has earned a median price of return of round 10% per 12 months. In different phrases, when you’ll possible see greater or decrease returns year-to-year, these annual returns ought to common out to round 10% per 12 months over time.

Say, for instance, you are investing $200 per thirty days in an S&P 500 ETF and also you’re incomes a 10% common annual return. This is roughly how a lot you would earn over time, relying on what number of years your investments need to develop.

Supply: Creator’s calculations by way of Investor.gov

Time is your most dear asset in relation to investing, and the longer you give your cash to develop, the extra you possibly can doubtlessly earn.

Whilst you will not turn into a millionaire in a single day with an S&P 500 ETF, it’s doable to build up $1 million or extra over time. By investing persistently for as a few years as doable, you would earn greater than you would possibly assume.

The S&P 500 ETF is a unbelievable possibility for individuals who desire a hands-off funding with the potential for substantial returns over time. You by no means want to fret about when to purchase or promote, and it is a lot much less research-intensive than investing in particular person shares.

The draw back, nonetheless, is that you may solely earn common returns. The Vanguard S&P 500 ETF goals to comply with the market, which implies it is unattainable for it to beat the market. You may nonetheless earn a big quantity over time, but when beating the market is certainly one of your main objectives, it’s possible you’ll be higher off shopping for particular person shares.

S&P 500 ETFs are comparatively secure, wholesome investments that may assist generate wealth that lasts a lifetime, and the Vanguard S&P 500 ETF will stay in my portfolio for the lengthy haul. By weighing the professionals and cons of this funding, it will likely be simpler to determine whether or not it is the fitting match for you.

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John Mackey, CEO of Entire Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. Katie Brockman has positions in Vanguard S&P 500 ETF. The Motley Idiot has positions in and recommends Amazon, Apple, Tesla, and Vanguard S&P 500 ETF. The Motley Idiot recommends the next choices: lengthy March 2023 $120 calls on Apple and brief March 2023 $130 calls on Apple. The Motley Idiot has a disclosure coverage.