Among the best things about investing in the past 10 years is that your timing didn't matter so much. Sure, there have been rough patches for the S&P 500 — the primary benchmark for the U.S. stock market — but it's always recovered.
In fact, a $500 investment in an exchange-traded fund (ETF) that tracked the performance of the S&P 500 made on July 31, 2009, would be worth more than $1,850 as of July 30, 2019, according to calculations by Grow. That works out to a return of more than 270%.
Rather than just calculating the change in price (which is about 204% in that time period), we've calculated the total return. That assumes you reinvested the dividends you earn each quarter.
When you own a fund, or an individual stock, you'll usually be paid a quarterly dividend — a portion of that company's or fund operator's profit — that you can use to buy more shares. Your returns will be greater when you reinvest your dividends over the long run, so that's an easy way to grow the value of your portfolio.
Buying an asset like an index fund and then holding on to it for years is a simple but effective approach to investing championed by, among others, investing legend Warren Buffett, for everyone from beginners to the pros.
The U.S. stock market has been rising pretty steadily since 2009, even with some bumpiness along the way. That's why a buy-and-hold index fund strategy would have paid off in the past 10 years: You would have bought at the lowest price for an S&P 500 ETF in the past decade and then given yourself time to benefit from the market's rally.
In addition to starting as soon as you can and using a buy-and-hold approach, experts generally recommend that you continue regularly adding money to your portfolio. That way you have time on your side, a key for long-term investing success, and you'll potentially buy at times when stock prices are lower.
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