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The Nasdaq has recently entered bear market territory, indicating that the current economic downturn could persist. While this may cause concern for investors, historical trends show that purchasing assets during market fear often leads to considerable long-term returns. When valuations are low, it can set the stage for significant gains in the future, as the market has consistently exhibited resilience and recovery over time.
This article explores the potential growth of a $100 monthly investment into top Nasdaq stocks over a substantial period of 25 years or more. Could such an investment pave the way to becoming a millionaire?
An ETF for Access to Leading Tech Stocks
Choosing the right stocks in the Nasdaq can be daunting, as certain investments carry higher risk than others. A practical approach is to diversify by investing in a range of stocks rather than focusing on just one or two. One effective means of obtaining this diversification is through an exchange-traded fund (ETF).
The Invesco QQQ Trust (QQQ) is an ETF designed to track the Nasdaq 100 index, which comprises the top 100 non-financial stocks listed on the Nasdaq. By investing in this fund, you can gain exposure to many of the exchange’s most valuable companies, alleviating concerns about smaller, riskier growth stocks. The index features established giants like Microsoft and Nvidia, among others.
Despite facing challenges this year, the ETF has demonstrated strong performance over the past decade.
Potential Growth of a $100 Monthly Investment in this ETF
By consistently investing $100 each month into the ETF, irrespective of market conditions, investors can benefit from dollar-cost averaging. This strategy allows you to avoid the pitfalls of trying to time the market accurately. A straightforward investing approach also enhances sustainability over the long term.
The following table illustrates potential portfolio values after 25 years of investing $100 monthly in the Invesco QQQ Trust, assuming an annual growth rate between 9% and 11%. Historically, the S&P 500 has averaged a return of about 10% per year, but given the current market conditions and emphasis on growth stocks, it’s conceivable that returns might exceed this average if investing begins now.
Future Portfolio Balance Assuming You Invest $100 Per Month
Year
9% annual growth rate
10% annual growth rate
11% annual growth rate
25
$112,953
$133,789
$159,058
30
$184,447
$227,933
$283,023
35
$296,385
$382,828
$497,347
40
$471,643
$637,678
$867,896
Table and calculations by author.
Regrettably, even with an 11% annual return from the Invesco ETF, becoming a millionaire may not be guaranteed. Nonetheless, increasing your investment amount or achieving a higher average return could substantially enhance the likelihood of reaching a portfolio value exceeding $1 million in the long run.
The Benefits of Monthly Investing for Long-Term Investors
Consistent, regular investments can help minimize market volatility’s impact and enable you to concentrate on your long-term objectives. Even during periods of market underperformance, you can still position yourself favorably for the future.
For instance, if you were to invest $100 monthly over 25 years, your total contributions would amount to $30,000. According to earlier projections, due to the effects of compounding, your portfolio could reach well over six figures, even with conservative returns of 9%.
As long as circumstances permit, investing $100 or more monthly into an ETF like the Invesco Trust is likely to serve as a sound long-term strategy.
Source
www.fool.com