This Year's Top 5 Investment Picks, as Favored by Warren Buffett, Includes This Notable Selection. Discover How It Potentially Elevates Your Wealth to Millionaire Status.
The hype surrounding artificial intelligence (AI) has fueled market growth this year, with investors pouring money into companies involved in AI development or implementation, such as chipmaker Nvidia and electric vehicle titan Tesla. These firms are among the most favored by retail investors this year, with substantial net inflows of funds. Performance-wise, both Nvidia and Tesla have experienced significant gains this year.
Nvidia was the stock that saw the largest net inflow of funds from retail investors, with almost $30 billion, according to data from Vanda Research. Tesla ranked third with net inflows exceeding $14 billion. However, another asset surpassed Tesla in popularity, becoming the second-most purchased security by retail investors.
Interestingly, this asset is featured in billionaire Warren Buffett's portfolio. Dubbed the 'Oracle of Omaha', Buffett vouches for its investment potential and encourages non-professional investors to consider it. As a matter of fact, he directs his trustees to invest a significant portion of his wealth into it for his wife's benefit after his demise. It's safe to say that this is an investment personally endorsed by Buffett. Moreover, this investment has the potential to turn an ordinary individual into a millionaire.
Bets on a well-known benchmark
So, what exactly is this desirable investment that Buffett and retail investors hold in high regard? It's none other than the SPDR S&P 500 ETF Trust (SPY -0.48%), an exchange-traded fund (ETF) that mirrors the S&P 500's performance. This is achieved by holding the same stocks as the S&P 500 in the same proportions, resulting in the ETF replicating the index's performance. This makes it an ideal bet for those who are bullish on the S&P 500.
The data for SPY courtesy of YCharts
Buffett provides insight on why one might want to invest in the benchmark. In his 2013 letter to shareholders, he wrote, "American business has performed exceptionally well over time and will continue to do so." He added that non-professional investors should invest in a diversified mix of businesses for steady growth, with a low-cost S&P 500 index fund being a viable option.
A second reason to consider investing in this ETF is its excellent track record. The S&P 500 has delivered an average annual return of more than 10% since it was established as a 500-company index in the late 1950s. It's worth noting that past performance is not an indicator of future results, but the lengthy track record is a testament to the index's potential for growth over the long term.
Investing in this ETF gives you exposure to contemporary investment themes, such as AI currently, due to the leading companies being included in the index. Furthermore, the ETF and index, with 11 sectors, provide diversification, mitigating the negative impact if a specific investment theme loses momentum. Thus, the SPDR S&P 500 ETF Trust offers a remarkable balance of growth potential and safety.
Investing in the long-term
Now, let's delve into how buying this ETF could potentially make you a millionaire. This entails the concept of purchasing shares of the fund consistently over an extended period, which allows you to reap the benefits of compounding.
Consider the math behind this millionaire-making strategy. Let's suppose the index maintains its average annual return of about 10%. If you initially invest $1,000 in SPDR S&P 500 ETF Trust shares and then contribute $300 every month for 35 years, your investment could reach $1 million. Your total contributions would amount to $127,000, while your returns would exceed $876,000. That's a substantial boost to your portfolio.
It's likely that you may not have the capacity to invest such an amount per month or maintain the investment for such a long duration. However, even with a smaller investment over a shorter time frame, you can still yield substantial returns due to the power of compounding. The key is regular investing over an extended period.
In conclusion, as we approach the new investing season, investing in this Buffett and retail investor favorite is a shrewd move. It could provide gradual growth to your portfolio and potentially even make you a millionaire over time.
In light of Warren Buffett's endorsement and the ETF's track record of delivering an average annual return of over 10% since its establishment, those interested in investing might consider allocating their finance towards the SPDR S&P 500 ETF Trust. This could potentially be an opportunity for retail investors to grow their money through long-term investing, leveraging the power of compounding, much like how Buffett himself has built his wealth.
Given the ETF's diversification and exposure to contemporary investment themes like artificial intelligence, investing in the SPDR S&P 500 ETF Trust could also provide a balance between growth potential and safety, making it a popular choice for many investors, including Buffett, when considering their finance and investing strategies.
