The stock market turns ordinary people into millionaires every day, and it’s actually one of the easiest ways for the average person to grow wealth.
When you invest in a stock, you buy an ownership stake in the company at whatever the current market value is.
But over the long term, the S&P 500, one of the best-known market indexes, averages about a 10% return per year.
That means that if you invested in an index fund containing all the same stocks as the S&P 500, you could also see your savings grow by an average of about 10% per year over several decades.
If you invested $10,000 into an S&P 500 index fund today and it had a 10% average annual rate of return over the next 40 years, you’d end up with nearly $452,600.
Those who routinely invest more money could end up with a much larger sum, as could those who reinvest their dividends, excess earnings that companies split with their shareholders.
Now, I imagine some of you are thinking, “That’s great for someone who has $10,000 to spare, but I don’t.” And the good news is you don’t have to.
But it’s a lot easier for most people to set aside a few dollars every month than to come up with thousands of dollars all at once.
All you have to do is keep putting in money, and the index fund will do the rest of the work for you.
The only other thing you really need is patience.