This ETF Could Overwhelm Any Retirement Account | personal finance

(Selena Marajin)

Almost all of us need to save and invest for our retirement, because Social Security, while vital, will not support us well on its own. Social Security’s recent average monthly retirement benefit was $1,665, or about $20,000 annually.

Sadly, many, if not most, of us are behind in our savings and investments. According to the 2021 Retirement Confidence Survey, only 72% of surveyed workers reported having saved anything for retirement, and many of them had saved far less than they should have to reach their retirement goals. However, it is not too late to do better.

Image source: Getty Images.

Here’s an easy investment strategy that can help you build wealth for your future, plus an exchange-traded fund (ETF) that can supercharge the strategy.

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An easy and basic strategy.

It’s a shame that many people put off or avoid investing because it seems complicated and intimidating. It does not have to be. You don’t have to read a dozen investment books or spend hours a week studying stocks, deciding which one to buy or sell.

Instead, you could put most or all of your long-term money (dollars you won’t need for at least five, if not 10, years) in one or more low-cost broad-market index funds. Each index fund aims to deliver roughly the same return as the index it tracks, minus fees. Here are three solids to consider:

  • SPDR S&P 500 ETF (NYSEMKT: SPY)
  • Vanguard Total Stock Market ETF (NYSEMKT: VTI)
  • Vanguard Total World Stock ETF (NYSEMKT: VT)

Respectively, these investments will instantly invest your money in approximately 80% of the US stock market, the entire US stock market, or nearly the entire world stock market. Save money in one or more of them (or other good index funds) on a regular basis, and for many years your wealth should grow.

During your particular investment time frame, the stock market could average annual returns of, say, 7% or perhaps 12%. There’s no way to know. Over very long periods, it has averaged close to 10% per year. The following table is a bit conservative, reflecting 8% annual growth and showing how much you could accumulate over time with just index funds:

Growing at 8% for…

$10,000 invested annually

$15,000 invested annually

$20,000 invested annually

5 years

$63,359

$95,039

$126,718

10 years

$156,455

$234,683

$312,910

15 years

$293,243

$439,865

$586,486

20 years

$494,229

$741,344

$988,458

25 years

$789,544

$1,184,316

$1,579,088

30 years

$1,223,459

$1,835,189

$2,446,918

Data source: Author’s calculations.

Boost your investment strategy

That’s pretty impressive growth. However, you may want to aim for faster growth. If so, consider parking some of your money in the Invesco QQQ Trust (NASDAQ:QQQ). It is an ETF made up of the 100 largest non-financial companies listed on the Nasdaq Stock Market (measured by market capitalization).

It’s not guaranteed to outperform the US stock market overall, but its track record is pretty good:

Average annual return on…

Invesco QQQ Trust

5 years

20.6%

10 years

18.5%

15 years

fifteen%

Source: Morningstar.com, as of April 22, 2022.

If you look at his recent top 10 holdings, you’ll get an idea of ​​how he’s been able to generate such returns:

Business

Assignment

Apple

12.67%

Microsoft

9.97%

amazon.com

7.28%

Tesla

4.69%

Alphabet (Class C shares)

3.76%

Alphabet (Class A shares)

3.58%

nvidia

3.51%

Metaplatforms

3.22%

Costco

2.06%

broadcom

1.89%

The fund also has around 90 other holdings, including many highly reputable companies such as:

  • Intel
  • Amgen
  • Netflix
  • PayPal
  • Adobe
  • starbucks
  • airbnb
  • intuitive surgical
  • Zoom Video Communications
  • Lululemon Athletica

So give these investment strategies some thought, especially if you need to do better than you’ve been doing. The first one alone, one or two simple index funds, may be enough for you, and if you want to aim higher, consider putting some money into the QQQ ETF. Don’t leave your future financial security to chance, and don’t assume Social Security will be enough.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an Alphabet executive, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of the board of directors of The Motley Fool. Selena Maranjian owns Alphabet (A shares), Alphabet (C shares), Amazon, Amgen, Apple, Costco Wholesale, Intuitive Surgical, Meta Platforms, Inc., Microsoft, Netflix, PayPal Holdings, and Starbucks. The Motley Fool owns and recommends Adobe Inc., Airbnb, Inc., Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Costco Wholesale, Intel, Intuitive Surgical, Lululemon Athletica, Meta Platforms, Inc., Microsoft, Netflix, Nvidia, PayPal Holdings, Starbucks, Tesla, Vanguard Total Stock Market ETF, and Zoom Video Communications. The Motley Fool recommends Amgen and Broadcom Ltd and recommends the following: January 2023 Long Calls $57.50 at Intel, March 2023 Long Calls $120 at Apple, April 2022 Short Calls $100 at Starbucks, January Short Calls 2023 $57.50 on Intel and March 2023 Short Calls $130 on Apple. The Motley Fool has a disclosure policy.

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