Almost every American is probably thinking about how to best use their stimulus checks.
Many will use their money on groceries, rent and other essentials — which is a great move. As is adding to your emergency fund. But if your budget looks to be in the clear, you might want to invest your stimulus money.
This can be a great option for growing long-term wealth, and by making the right moves, you can even turn your $1,400 stimulus into as much as $100,000.
Where to put your stimulus
One way to grow your money while limiting your risks is to buy into index funds or ETFs. These investments spread your money over hundreds of companies. This limits your risk and still allows you to profit from stocks.
You can choose to invest in broad-market funds that match the whole market, or you can buy into niche funds for certain sectors in the market.
Broad-market funds, like the ones that track the S&P 500, are among the safest sorts of investments possible. Although they do sometimes have short-term volatility, you’re almost assured to get positive roi over the long haul.
The lazy approach to $100,000
One of the biggest reasons to invest in S&P 500 index funds is that they are hands-off. Meaning you don’t need to do anything to profit. You don’t need to pick stocks or decide when to sell. All you need to do is put your money into the fund and the managers will take care of the rest.
Since the S&P 500 started, it has brought in, on average, an ROI of nearly 10% per year.
If you were to put that $1,400 into an index fund earning a 10% yearly return. And let’s also say you continued investing $100 a month. You would reach $100,000 after 23 years.
The important key to making a lot of money with index funds is to start early. These funds work best when you keep them for as long as possible.
Which index fund should you go with?
You have many choices of index funds, and they’re all pretty similar. Some of the most popular ones being:
- SPDR S&P 500 ETF Trust (NYSEMKT:SPY)
- Vanguard S&P 500 ETF (NYSEMKT:VOO)
- iShares Core S&P 500 ETF (NYSEMKT:IVV)
Each of these is a great choice. All of them are linked to the S&P 500, and they all charge low fees — which gives you more earnings over time. More importantly, they can help you turn your stimulus into a much better stimulus years down the road.
Author: Blake Ambrose