It's safer and simpler than you might think to make money in the stock market.
Investing in the stock market is one of the simplest, most effective ways to build long-term wealth, and even novice investors can make a lot of money with the right strategy.
An exchange-traded fund (ETF) can be a fantastic option for new and seasoned investors, especially those looking for a low-effort investment. An ETF is a basket of securities bundled together into a single fund, meaning you'll instantly own a stake in dozens or hundreds of stocks with just one investment.
There are countless ETFs to choose from, and not all are safe investments. While there's no single correct way to invest, there's one particular ETF that's safer, more reliable, and highly recommended by Warren Buffett. Here's how it could help you turn $300 per month into $976,000 or more.
Buffett's highly recommended investment
If you're looking to better protect your portfolio while still seeing significant earnings over time, an S&P 500 ETF could be a fantastic option. An S&P 500 ETF tracks the , meaning it includes the same stocks as the index itself and aims to mirror its performance over time.
Through his holding company Berkshire Hathaway, Warren Buffett owns two S&P 500 ETFs -- the Vanguard S&P 500 ETF (VOO 0.15%) and the SPDR S&P 500 ETF Trust (SPY 0.14%).
He also highly recommends this type of investment, even betting $1 million back in 2008 that an S&P 500 fund could outperform a group of actively managed hedge funds. He easily won that bet, with his investment earning total returns of around 126% over 10 years, compared to the five hedge funds' average return of 36% in that time.
A safe yet powerful ETF
There are never any guarantees when it comes to the stock market, but an S&P 500 ETF is about as close as you can get to guaranteed positive long-term returns.
The index itself has a decades-long history of recovering from even the most severe downturns. Also, because the index contains stocks from 500 of the largest and strongest U.S. companies, the S&P 500 ETF carries less risk than many other investments. While all stocks are subject to short-term volatility, the stocks within the S&P 500 are more likely to rebound and experience long-term growth.
In fact, as long as you keep a long-term outlook, it's historically been nearly impossible not to make money with this investment. Analysts at Crestmont Research examined the S&P 500's historical performance and found that every single 20-year period has ended in positive total returns. This means that if you'd invested in an S&P 500 fund at any point and held it for 20 years, you'd have made money.
Turning $300 per month into $976,000
Past performance doesn't predict future returns, so there's no way to say for certain how the S&P 500 will perform over time.
That said, the market itself has earned an average rate of return of around 10% per year over the past 50 years. While there are no guarantees it will continue with that track record, there's a good chance it will see similar returns over the coming decades.
Let's say that your investment is earning 10% average annual returns, in line with the market's historic performance. If you were to invest $300 per month, here's approximately how much you could accumulate over time:
| Number of Years | Total Portfolio Value |
|---|
| 20 | $206,000 |
| 25 | $354,000 |
| 30 | $592,000 |
| 35 | $976,000 |
Data source: Author's calculations via investor.gov.
To reach $976,000 in total savings, you'll need to invest consistently for around 35 years. But if you have more time to let your money grow (or if you can afford to invest more per month), you could earn even more than that.
The S&P 500 ETF comes highly recommended by Warren Buffett, and for good reason. Not only is it safer than many other investments, but it also has a long history of earning positive returns. If you're looking for a hands-off investment that could help you make a lot of money over time, the S&P 500 ETF could be a fantastic choice.
Katie Brockman has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Berkshire Hathaway and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
FAQs
To reach $976,000 in total savings, you'll need to invest consistently for around 35 years. But if you have more time to let your money grow (or if you can afford to invest more per month), you could earn even more than that. The S&P 500 ETF comes highly recommended by Warren Buffett, and for good reason.
What is the 70 30 Buffett rule investing? ›
What Is a 70/30 Portfolio? A 70/30 portfolio is an investment portfolio where 70% of investment capital is allocated to stocks and 30% to fixed-income securities, primarily bonds. Any portfolio can be broken down into different percentages this way, such as 80/20 or 60/40.
Is VT better than VOO? ›
VOO - Volatility Comparison. The current volatility for Vanguard Total World Stock ETF (VT) is 3.17%, while Vanguard S&P 500 ETF (VOO) has a volatility of 3.37%. This indicates that VT experiences smaller price fluctuations and is considered to be less risky than VOO based on this measure.
What stocks made Warren Buffet the most money? ›
Top 8 holdings in the Warren Buffett portfolio
- Apple (AAPL).
- Bank of America (BAC).
- American Express Co. (AXP).
- Coca-Cola Co. (KO).
- Chevron (CVX).
- Occidental Petroleum (OXY).
- Kraft Heinz (KHC).
- Moody's Corp. (MCO).
VOO - Performance Comparison. In the year-to-date period, VGT achieves a 10.29% return, which is significantly lower than VOO's 11.78% return. Over the past 10 years, VGT has outperformed VOO with an annualized return of 20.71%, while VOO has yielded a comparatively lower 13.05% annualized return.
What is the 25 5 rule Warren Buffett? ›
One of the key principles that Buffett follows is to focus on the most important things. He has said that he only spends 25% of his time on the top 5% of his activities, and the other 75% of his time on the bottom 95%.
What is Warren Buffett's 90 10 rule? ›
Warren Buffet's 2013 letter explains the 90/10 rule—put 90% of assets in S&P 500 index funds and the other 10% in short-term government bonds.
What is the most successful ETF? ›
1. VanEck Semiconductor ETF. The VanEck Semiconductor ETF (SMH) tracks a market-cap-weighted index of 25 of the largest U.S.-listed semiconductors companies. Midcap companies and foreign companies listed in the U.S. can also be included in the index.
What is Vanguard's best performing ETF? ›
Vanguard High Dividend Yield ETF (VYM)
The better Vanguard ETF for their needs is likely VYM, which delivers a higher 2.9% 30-day SEC yield by targeting the FTSE High Dividend Yield Index. It also charges the same expense ratio as VIG does, at 0.06%.
Is QQQ better than VOO? ›
Average Return
In the past year, QQQ returned a total of 35.63%, which is significantly higher than VOO's 28.53% return. Over the past 10 years, QQQ has had annualized average returns of 18.84% , compared to 13.03% for VOO. These numbers are adjusted for stock splits and include dividends.
These were the stocks Buffett had in his portfolio heading into 2024. Some top picks of Berkshire are Apple Inc. (NASDAQ:AAPL), Coca-Cola Co (NYSE:KO) and Chevron Corp (NYSE:CVX).
Is Coca-Cola a good stock to buy? ›
Based on analyst ratings, Coca-Cola's 12-month average price target is $67.67. Coca-Cola has 7.36% upside potential, based on the analysts' average price target. Coca-Cola has a conensus rating of Strong Buy which is based on 11 buy ratings, 2 hold ratings and 0 sell ratings.
Does Warren Buffett own Walmart? ›
World's third richest person Warren Buffet's Berkshire Hathaway has sold its last Walmart shares, ending a relationship of over 20 years. The world's largest retailer was once among Berkshire's five biggest equity holdings as recently as 2014, valued at over $5 billion.
Should I buy SPY or VOO? ›
If you are a cost-conscious investor, the VOO, IVV, and SPLG might make a more attractive option compared to SPY with their lower expense ratios. Conversely, you might appreciate the higher liquidity of SPY if you're an active or institutional trader.
Are Fidelity ETFs better than Vanguard? ›
While Fidelity wins out overall, Vanguard is the best option for retirement savers. Its platform offers tools and education focused specifically on retirement planning.
Why is VOO so popular? ›
It provides exposure to the largest and most established US companies; that enhances the diversification as well as the quality of the portfolio. So, when the market is up, the portfolio is up; when the market is down, the portfolio is down, but you're holding the best and the brightest of all the US companies.
What is a 30 70 investment strategy? ›
The portfolio seeks to achieve higher risk-adjusted returns within predefined levels of risk, over a full market cycle, by accessing strategic asset class allocations through cost-effective exchange-traded funds, which targets 30% Equity and 70% Fixed Income.
What is the 70% rule investing? ›
Basically, the rule says real estate investors should pay no more than 70% of a property's after-repair value (ARV) minus the cost of the repairs necessary to renovate the home. The ARV of a property is the amount a home could sell for after flippers renovate it.
What is the 70 20 10 rule for investing? ›
The 70-20-10 budget formula divides your after-tax income into three buckets: 70% for living expenses, 20% for savings and debt, and 10% for additional savings and donations. By allocating your available income into these three distinct categories, you can better manage your money on a daily basis.
What are the Warren Buffett's first 3 rules of investing money? ›
What are Warren Buffett's biggest investing rules?
- Rule 1: Never lose money. This is considered by many to be Buffett's most important rule and is the foundation of his investment philosophy. ...
- Rule 2: Focus on the long term. ...
- Rule 3: Know what you're investing in.
