How 1 Index Fund Can Lead You to Millionaire Land | Smart Change: Personal Finance

(Steven Walters)

Achieving the million dollar mark is a lifelong goal for many people, and frankly, over time, it has become imperative for a lot of people to have at least that much. Save for retirement. Fortunately, making a million dollars is a little easier than some might imagine; All it takes is consistency, time and one index fund.

iShares Core S&P 500 ETF

The Standard & Poor’s 500 It is an index that tracks the 500 largest publicly-listed US companies. While the S&P 500 is an index, various financial companies have pooled their own S&P 500 funds to buy shares in the index. The S&P 500 Index Fund That Can Lead You To Millionaire Land Is iShares Core S&P 500 ETF (NYSEMKT: IVV). It is one of the low cost index funds, and based on historical returns, it can do a lot of heavy lifting for you.

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The fund owns shares in all components of the S&P 500, with the top 10 holdings making up 29.39% of the fund. One of the main benefits of investing in the fund is instant diversification you receive. It has companies in almost any sector you can imagine. The top five industries represented are:

  • Information Technology (27.96%).
  • Healthcare (13.58%).
  • Discretionary consumer (11.99%).
  • Finance (11.08%).
  • Communications (9.34%).

With just one fund, you can achieve one of the main pillars of investing (diversification), while also investing in large-cap companies that are financially sound.

Let the overlay do the work for you

Reaching a million dollars by strict savings is impossible for most people. The real key to making a million dollars is letting go of time and double Do most of the work for you. Historically, the S&P 500 has returned about 10% annually over the long term. Of course, in some years it will be less, in others it will be more, but in general, 10% is a good norm to use.

Assuming that the iShares Core S&P 500 ETF would return 10% annually, here’s how much you would have raised in 30 years with various monthly contributions (the fund’s expense ratio is 0.03%):

Monthly subscriptions Annual return (fee included) Account value after 30 years
500 dollars 9.97% $981,000
600 dollars 9.97% $1.17 million
$750 9.97% $1.47 million
1000 dollars 9.97% $1.96 million

In this scenario, $500 per month – that’s $6000 per year IRA مساهمة Contribution Limit For people under 50 – almost enough to make a million dollars in 30 years. Even increasing monthly contributions to $600 would equate to more than $1.17 million in 30 years. More than anything else, this demonstrates the power of time and how its compounding effect can make up the bulk of your investment gains. At $600 per month, you would have personally invested $216,000 in the fund in 30 years, yet your total would be $900,000 more than that amount.

Making sure you’re financially comfortable in retirement is all about consistency and discipline. In the short term, results may seem slim, and downturns in the market may cause you to second-guess your investment options, but confidence in the strength of the S&P 500 and sticking to your plan will definitely result in exponential results over the long run.

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Stephen Walters He has no position in any of the mentioned shares. The Motley Fool does not have a position in any of the stocks mentioned. Motley Fool owns a profile Disclosure Policy.