How much should I invest in ETF per month?
You expose your portfolio to much higher risk with sector ETFs, so you should use them sparingly, but investing 5% to 10% of your total portfolio assets may be appropriate. If you want to be highly conservative, don't use these at all.
You expose your portfolio to much higher risk with sector ETFs, so you should use them sparingly, but investing 5% to 10% of your total portfolio assets may be appropriate. If you want to be highly conservative, don't use these at all.
The Bottom Line
ETF investors can significantly reduce their investment costs if they invest larger amounts less frequently or invest through brokerages that offer commission-free trading. Dollar-cost averaging with ETFs isn't a strategy that will work well for everyone but that doesn't mean it isn't worthwhile.
Years Invested | Balance At the End of the Period |
---|---|
10 | $102,422 |
20 | $379,684 |
30 | $1,130,244 |
40 | $3,162,040 |
Experts suggest investing 15% of your income each month, and more if you can afford to. However, if 15% is out of your budget right now, you should still invest what you can afford. Look to reduce your expenses to free up more money and invest more when it's feasible.
A $1000 investment made in November 2013 would be worth $5,574.88, or a gain of 457.49%, as of November 16, 2023, according to our calculations. This return excludes dividends but includes price appreciation. Compare this to the S&P 500's rally of 150.41% and gold's return of 46.17% over the same time frame.
How many ETFs are enough? The answer depends on several factors when deciding how many ETFs you should own. Generally speaking, fewer than 10 ETFs are likely enough to diversify your portfolio, but this will vary depending on your financial goals, ranging from retirement savings to income generation.
A $100 monthly investment doesn't seem like a lot, but when you put this money into the market, it earns returns. If you earn 10%, in a year, your $100 initial investment would be worth $110.00. Next year, you would earn 10% not on $100, but instead on $110, so you'd end up with $121.00.
If you own shares of an exchange-traded fund (ETF), you may receive distributions in the form of dividends. These may be paid monthly or at some other interval, depending on the ETF.
Nearly all leveraged ETFs come with a prominent warning in their prospectus: they are not designed for long-term holding. The combination of leverage, market volatility, and an unfavorable sequence of returns can lead to disastrous outcomes.
What if I invest $200 a month for 20 years?
Bottom Line. If you can invest $200 each and every month and achieve a 10% annual return, in 20 years you'll have more than $150,000 and, after another 20 years, more than $1.2 million. Your actual rate of return may vary, and you'll also be affected by taxes, fees and other influences.
Invest in a High Yield Savings Account
While interest rates are low right now, some online savings accounts offer rates up to 3% APY or higher. Interest compounds daily allowing balances to grow. An account with a 3% APY would produce $5,000 per month in interest on a balance of $1.66 million.
If You Invest $1,500 per Month
Putting away $1,500 a month is a good savings goal. At this rate, you'll reach millionaire status in less than 20 years. That's roughly 34 years sooner than those who save just $50 per month.
The good news, though, is that you don't need to be a stock market expert or have thousands of dollars per month to invest. In fact, with just $100 per month, you could potentially build a portfolio worth $325,000 or more.
The truth is that most investors won't have the money to generate $1,000 per month in dividends; not at first, anyway. Even if you find a market-beating series of investments that average 3% annual yield, you would still need $400,000 in up-front capital to hit your targets.
Those who are able to save a significant amount beyond their retirement account contributions may be able to generate $200 monthly in interest. “If you have $50,000 in a high-yield savings account offering 5% APY, that's $200 a month right there,” Henry says.
If you invested in the company 10 years ago, that decision could have paid off. According to CNBC calculations, a $1,000 investment in Coca-Cola in 2009 would be worth more than $2,800 as of Feb. 15, 2019.
For instance, say your investments are earning a 12% average annual return compared to 10% per year. If you're still investing $100 per month, you'd have a total of around $518,000 after 35 years, compared to $325,000 in that time period with a 10% return.
So if you're happy with a portfolio that performs comparably to the stock market as a whole, then sticking to S&P 500 ETFs alone isn't a bad idea. However, if you assemble a portfolio of individual stocks that perform better, you might enjoy a 12% or 15% return over time -- or more.
With enough time and consistency, you can earn well over $1 million with ETFs while still limiting your risk. Data source: Author's calculations via Investor.gov.
Is 7 ETFs too much?
Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification. But the number of ETFs is not what you should be looking at.
Investors face substantial risks with all leveraged investment vehicles. However, 3x exchange-traded funds (ETFs) are especially risky because they utilize more leverage in an attempt to achieve higher returns.
5) Watch Your Money Grow
Investing $100 per month, with an average return rate of 10%, will yield $200,000 after 30 years. Due to compound interest, your investment will yield $535,000 after 40 years. These numbers can grow exponentially with an extra $100.
You plan to invest $100 per month for five years and expect a 6% return. In this case, you would contribute $6,000 over your investment timeline. At the end of the term, your portfolio would be worth $6,949. With that, your portfolio would earn around $950 in returns during your five years of contributions.
Key Points. The U.S. stock market has created trillions of dollars in wealth. Investing in an S&P 500 index fund is a great way to take advantage of the stock market. Investing $500 a month can make you a millionaire over time.
References
- https://www.investopedia.com/terms/e/etf.asp
- https://www.etfcentral.com/etf-u/guides/how-many-etfs-should-i-own
- https://www.investopedia.com/ask/answers/091815/when-are-mutual-funds-considered-bad-investment.asp
- https://curvo.eu/article/etf-risk
- https://www.nerdwallet.com/article/investing/sp-500-index-fund
- https://www.forbes.com/advisor/investing/how-to-invest-in-sp-500/
- https://www.fidelity.com/learning-center/investment-products/etf/which-is-right-for-you
- https://www.experian.com/blogs/ask-experian/pros-and-cons-of-investing-in-etfs/
- https://www.bankrate.com/investing/stocks-vs-etfs/
- https://www.investopedia.com/articles/investing/030315/etfs-characteristics-shortterm-trading.asp
- https://www.investopedia.com/articles/investing/111115/5-reasons-choose-mutual-funds-over-etfs.asp
- https://m.economictimes.com/markets/stocks/news/the-optimal-number-of-mutual-funds-that-you-should-hold-in-your-portfolio/articleshow/99009145.cms
- https://www.thestreet.com/etffocus/trade-ideas/the-only-leveraged-etf-that-i-would-buy-hold-long-term
- https://www.investopedia.com/terms/r/ruleof72.asp
- https://www.investopedia.com/ask/answers/how-can-i-buy-sp-500-fund/
- https://www.fidelity.com/learning-center/investment-products/etf/drawbacks-of-etfs
- https://www.5paisa.com/stock-market-guide/mutual-funds/how-to-stop-sip
- https://www.fool.com/the-ascent/buying-stocks/articles/will-investing-100-a-month-really-make-a-difference-in-your-net-worth/
- https://www.fool.com/investing/how-to-invest/etfs/
- https://www.fool.com/investing/2023/11/10/got-100-per-month-to-invest-heres-how-far-it-could/
- https://www.sec.gov/investor/alerts/etfs.pdf
- https://www.nirmalbang.com/knowledge-center/etf-vs-mutual-funds.html
- https://money.stackexchange.com/questions/71250/when-looking-at-a-mutual-fund-how-can-you-tell-if-it-is-a-traditional-fund-or-a
- https://www.cnbc.com/2019/02/15/if-you-put-1000-dollars-in-coca-cola-in-2009-heres-what-youd-have-now.html
- https://finance.yahoo.com/news/genius-ways-1-000-month-105500970.html
- https://www.fidelity.com/learning-center/investment-products/etf/benefits-of-etfs
- https://www.fidelity.com/learning-center/investment-products/etf/dividends-on-etfs
- https://wealthdesk.in/blog/are-etfs-good-for-long-term-investing/
- https://www.schwab.com/learn/story/etfs-and-taxes-what-you-need-to-know
- https://www.fool.com/investing/how-to-invest/index-funds/best-sp-500-index-funds/
- https://www.fool.com/investing/how-to-invest/index-funds/safest-index-funds/
- https://money.usnews.com/money/retirement/articles/how-can-i-earn-100-200-or-500-per-month-in-guaranteed-income-in-retirement
- https://www.suzeorman.com/blog/Investing-for-Your-Long-Term-Goals
- https://www.investopedia.com/ask/answers/09/etfs-vs-mutual-funds.asp
- https://www.schwab.com/learn/story/etf-vs-mutual-fund-it-depends-on-your-strategy
- https://www.bankrate.com/investing/mutual-fund-vs-etf-which-is-better/
- https://money.usnews.com/investing/articles/best-etfs-to-buy
- https://www.nasdaq.com/articles/how-far-will-%24100-per-month-go-by-investing-in-the-sp-500
- https://fortune.com/recommends/investing/investing-during-a-recession/
- https://money.usnews.com/investing/articles/best-vanguard-etfs-to-buy
- https://www.linkedin.com/pulse/why-doesnt-everyone-invest-index-funds-one-gayathiri-sri-rangan
- https://www.investopedia.com/investing/how-pick-best-mutual-fund/
- https://www.gsam.com/content/gsam/us/en/advisors/resources/investment-ideas/etfs-goldman-sachs/etfs-benefits.html
- https://www.experian.com/blogs/ask-experian/how-much-income-should-you-invest/
- https://www.investopedia.com/financial-edge/0113/7-easy-to-understand-etfs-to-replace-a-savings-account.aspx
- https://etfdb.com/tool/etf-stock-exposure-tool/
- https://www.investopedia.com/articles/investing/110314/key-differences-between-etfs-and-mutual-funds.asp
- https://www.fool.com/the-ascent/buying-stocks/articles/heres-what-happens-when-you-only-invest-in-sp-500-etfs/
- https://www.sarwa.co/blog/invest-sp-500
- https://wiserinvestor.com/is-an-etf-more-risky-than-a-mutual-fund/
- https://www.cnbc.com/2024/01/22/as-sp-500-enters-bull-market-heres-what-to-know-before-you-invest.html
- https://etfdb.com/compare/volume/
- https://www.investopedia.com/articles/exchangetradedfunds/11/advantages-disadvantages-etfs.asp
- https://www.etf.com/etf-education-center/etf-basics/why-are-etfs-so-tax-efficient
- https://www.nasdaq.com/articles/3-reasons-to-invest-in-an-sp-500-index-fund-and-2-reasons-to-avoid-it
- https://www.nasdaq.com/articles/got-%24500-to-invest-monthly-this-exchange-traded-fund-can-make-you-a-millionaire.
- https://www.trackinsight.com/en/education/how-many-etfs-should-you-own
- https://www.investopedia.com/ask/answers/06/xmutualfundticker.asp
- https://www.usatoday.com/money/blueprint/investing/best-sp-500-index-funds/
- https://www.nasdaq.com/articles/got-%24100-per-month-to-invest-heres-how-far-it-could-go-in-the-stock-market
- https://www.etf.com/etf-education-center/etf-basics/what-risks-are-there-in-etfs
- https://www.investopedia.com/articles/exchangetradedfunds/09/etf-out-of-business.asp
- https://www.canstar.com.au/investor-hub/buy-sell-hold-etfs/
- https://www.fidelity.com/learning-center/investment-products/etf/risks-with-etfs
- https://www.thebalancemoney.com/how-to-be-a-millionaire-453692
- https://money.usnews.com/investing/articles/best-etfs-to-buy-for-long-term-investors
- https://www.investopedia.com/articles/investing/020116/when-right-time-change-mutual-funds-etfs.asp
- https://smartasset.com/investing/investing-100-a-month-how-much-will-you-make
- https://investor.vanguard.com/investor-resources-education/etfs/etf-vs-mutual-fund
- https://www.nerdwallet.com/article/investing/what-is-an-etf
- https://www.nasdaq.com/articles/if-you-invested-$1000-in-sp-global-10-years-ago-this-is-how-much-youd-have-now
- https://www.fool.com/investing/2024/01/14/got-500-a-month-to-invest-heres-how-the-sp-500-cou/
- https://www.investopedia.com/articles/mutualfund/05/etfdollarcost.asp
- https://www.blackrock.com/hk/en/ishares/education/etf-for-the-long-game
- https://www.fidelity.com/learning-center/investment-products/etf/what-are-etfs
- https://lyonswealth.com/blog-details/how-much-money-do-i-need-to-invest-to-make-3000
- https://medium.com/crypto-and-money/7-proven-ways-to-make-5-000-9-000-per-month-in-passive-income-1aafbf025154
- https://smartasset.com/investing/investing-200-a-month-how-much-will-you-make
- https://www.investopedia.com/articles/investing/121515/why-3x-etfs-are-riskier-you-think.asp
- https://www.forbes.com/sites/pattieehsaei/2023/10/12/you-can-afford-to-invest-start-with-just-100-per-month/
- https://www.titan.com/articles/etf-drawbacks
- https://www.nasdaq.com/articles/can-you-actually-retire-a-millionaire-with-etfs-alone-5
- https://www.investopedia.com/articles/exchangetradedfunds/08/etf-mutual-fund-difference.asp
- https://investor.vanguard.com/investment-products/etfs/profile/voo
- https://www.schwab.com/mutual-funds/understand-mutual-funds
- https://www.cnbc.com/select/what-are-etfs-should-you-invest/
- https://www.investopedia.com/articles/investing/111715/how-vanguard-index-funds-work.asp
- https://www.angelone.in/knowledge-center/mutual-funds/are-etfs-a-good-option-for-the-long-term
- https://www.ramseysolutions.com/retirement/sp-500-index-funds
- https://www.investopedia.com/articles/investing/031716/vfinx-vs-spy-mutual-fund-vs-etf-case-study.asp
- https://www.investopedia.com/terms/m/mutualfund.asp
- https://www.investopedia.com/articles/mutualfund/07/etf_downside.asp
- https://www.investopedia.com/ask/answers/10/mutual-funds-advantages-disadvantages.asp
- https://www.nerdwallet.com/article/investing/exchange-traded-fund-closure
- https://www.schwab.com/etfs/mutual-funds-vs-etfs
- https://www.investopedia.com/articles/investing/021916/etfs-vs-mutual-funds-which-better-young-investors.asp
- https://etfdb.com/compare/highest-5-year-returns/
- https://www.investopedia.com/ask/answers/09/mutual-fund-etf.asp