Even if you’re expecting a slowdown in the market, investing your money on a regular basis can still be a no-brainer option.
Putting aside money each week into the stock market can be an effective way to build up your portfolio. If you can afford to invest $50 per week, that would be the equivalent of $2,600 per year, and it would total $65,000 after 25 years. Through the power of compounding, however, your balance would be worth significantly more than that.
Investing regularly in a top exchange-traded fund (ETF), such as the Vanguard S&P 500 ETF (NYSEMKT: VOO), can put you in a position to generate excellent returns in the long run. Here’s a look at how large a $50-per-week investment in this ETF could grow after a period of 25 years.
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Why investing weekly makes sense
In the past, it may have made sense to wait until you have a large balance built up before investing in the stock market, to ensure that commission fees don’t take a big chunk out of your investment. But now, with commission-free trading options, there’s no need to do that. If you have money in an account at a brokerage where you don’t have to pay commission fees, then investing smaller amounts more often can be more practical.
Investing on a weekly basis can also make a lot of sense, as it can help you get into the routine of just adding to your portfolio on a regular basis. Creating that habit can help ensure that you aren’t constantly thinking and worrying about what the market is doing and whether it’s a good time to invest. Investing $50 or whatever amount you can afford to put aside each week can be an easy way to steadily grow your portfolio on a recurring basis.
How much would a $50-per-week investment be worth in 25 years?
Before estimating how much your portfolio might be worth in the future, it’s important to consider what growth rate you expect it to average over that time frame. The Vanguard S&P 500 ETF is a suitable option for long-term investors because it tracks the S&P 500, which is a collection of the leading stocks on the U.S. markets. It also charges a minimal expense ratio of 0.03%. On average, the S&P 500 has generated returns of approximately 10% per year. While that doesn’t mean the return will always be that high, it’s a good indication of the level of return you might normally expect from investing in the stock market.
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Now, if you’re anticipating a slowdown in the markets, which may be prudent given how hot stocks have been in recent years, you may also want to factor in the possibility of lower returns in the future. For this reason, I’ve created the following table, which forecasts the potential balance of your portfolio after 25 years, assuming an investment of $50 per week at varying annual growth rates.
| Years | 8% Annual Growth | 9% Annual Growth | 10% Annual Growth | 11% Annual Growth |
|---|---|---|---|---|
| 25 | $207,594 | $245,092 | $290,543 | $345,756 |
Table and calculations by author.
As you can see, these balances are all significantly higher than the actual amount that you would have invested over this time frame — $65,000. This is why, even if you anticipate a slowdown in the stock market in the years ahead, investing in a top fund such as the Vanguard S&P 500 ETF can be an effective way to grow your portfolio.
It’s a good reminder that, regardless of the return you expect from the market, investing in a low-cost index fund that tracks the S&P 500 can still be a great decision, as it can help improve and strengthen your financial position in the long run.
