Can We Retire A Millionaire With S&P 500?

The good news is that it is easier and definitely achievable but it takes time, patience and discipline.

Saving for retirement is tough, especially when the stock market is volatile. It can also be difficult to distinguish the good investments from the bad when stock prices are down, and it's tempting to avoid the market altogether.

However, smart investment is the way to go. There's one type of investment that's safe, requires very little effort, and could help you retire a millionaire: the S&P 500 ETF.

Returns from S&P 500 ETF over the years

What Is That? 🤔 

The S&P 500 itself is a stock market index that includes stocks from 500 of the largest and strongest companies in the U.S.

Since launching in 1993, the SPDR S&P 500 ETF Trust has returned an average annual return of 9.53%, based on data from January.

The ETF posted its worst performance since 2008 with a -19.2% return in 2022. Many of the indexes and stocks have rebounded in 2023, including major technology stocks.

The SPDR S&P 500 ETF is up 9.1% year-to-date in 2023.

Apple and Microsoft are up 35.5% and 27.5%, respectively in 2023, outpacing the returns of the ETF and also helping boost the ETF.

Top 10 holdings

Seen as an ETF to represent the top 500 stocks, the ETF may now be too heavily weighted to the technology sector and to its top holdings. The top two holdings make up more than 13% of the weighting and the top 10 make up close to 28% of the assets.

The Pros 😉

There are several advantages of investing in an S&P 500 ETF, including:

- Instant diversification: Each ETF includes stocks from 500 companies across a wide variety of industries, and that diversification can help limit your risk. Even if a few stocks don't perform well, it won't sink your entire portfolio.

- Protection against volatility: No investment is immune to short-term volatility, but the S&P 500 itself has a perfect track record when it comes to recovering from downturns. No matter what the market has in store, it's extremely likely that the S&P 500 (and S&P 500 ETFs) will be able to rebound.

- Positive long-term returns: Despite all the short-term ups and downs, the S&P 500 has historically earned positive returns. In fact, since 2000, it's up by more than 176% -- despite experiencing the dot-com bubble burst, the Great Recession, the COVID-19 crash, the current downturn, and countless smaller corrections along the way.

Hedge funds vs S&P 500 index

The Cons 😅

S&P 500 ETFs have plenty of advantages, and they're a smart option for many investors. However, they do have their downsides.

If you're looking to take a more active role with your portfolio, for example, an S&P 500 ETF may not be the best fit. With this investment, you can't choose which stocks you buy, as you will automatically own a stake in all the companies within the S&P 500. If there are certain stocks you'd prefer to avoid, that's not possible with an S&P 500 ETF.

In addition, S&P 500 ETFs cannot beat the market. They're designed to follow the market, so the best they can do is earn average returns. For many people, the ease of an S&P 500 ETF outweighs the lower returns. But if you're looking to maximize your earnings, individual stocks may be the way to go.

Retiring a millionaire isn't easy, and it will require the right strategy and a long-term outlook. But S&P 500 ETFs can help protect your savings while making you a lot of money.

How To Retire A Millionaire? 🤑

By investing consistently and giving your money plenty of time to grow, you could accumulate $1 million or more.

Historically, the S&P 500 itself has earned an average rate of return of around 10% per year. This doesn't necessarily mean you'll earn 10% returns year after year, but rather all the annual returns will average out to around 10% per year over the long term.

Assuming you're earning a 10% average annual return, here's how much you'd need to invest each month to retire a millionaire, depending on how many years you have to save:

Time is money

It's never too early to begin saving for retirement, and the sooner you start, the less you'll need to invest each month to retire a millionaire.

Also, while waiting decades to build a million-dollar portfolio is tough, keep in mind that S&P 500 ETFs are hands-off investments. You don't need to research companies, choose individual stocks, or keep up with market movements.

Simply invest whatever you can afford and wait for your money to grow.

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