Here's How Investing in the Stock Market Can Help You Retire Early
Key Points
The Vanguard High Dividend Yield ETF is a diversified low-cost fund that pays an above-average dividend.
Making weekly investments into the fund can be a way to steadily build up your nest egg.
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Did you know that according to a recent study, nearly one-third of Americans aren't sure of when they might retire, or if they'll be able to do so at all? If you fall into that category or are just worried about your retirement, you may want to consider investing in the stock market.
Even if you don't have any money saved up today, you can make modestly sized investments into the stock market every week, which, through the effects of compounding, can become much larger in the future. That can set you up for a much stronger financial future, potentially even helping you retire early.
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Below, I'll show you how much a $50-per-week investment into a diversified exchange-traded fund (ETF) can be worth in 10, 20, and 30 years down the road.
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Here's how much a weekly $50 investment might grow to be worth
Nowadays, with commission-free trading options, it's easier than ever to invest small amounts on a weekly basis, without having fees take a big chunk. A good ETF that can make the most of your money is the Vanguard High Dividend Yield ETF (NYSEMKT: VYM). It pays a dividend of around 2% (which is higher than the S&P 500 average of 1.2%) and gives you exposure to more than 500 different stocks, while charging an extremely low expense ratio of 0.04%.
Historically, the S&P 500, which is a collection of the largest and most valuable stocks, has averaged a return of around 10% per year. Assuming that the Vanguard ETF can generate similar types of returns (when including dividends), this is how a $50-per-week investment in the fund might grow over the long term.
| Year | Portfolio Balance (Assuming 10% Growth) |
|---|---|
| 10 | $44,693 |
| 20 | $166,066 |
| 30 | $495,673 |
Table and calculations by author.
The more investing years you have and the earlier you start, the more significant the payoff will be in the end. By being able to set aside money each week and putting it into a solid ETF such as the Vanguard High Dividend Yield fund, you drastically improve your prospects for not just retiring comfortably, but also retiring early.
Why making weekly investments can be a great idea
By investing every week into the Vanguard High Dividend Yield ETF (or similar fund), you can drastically simplify the investing process. You don't have to think about which stocks to buy right now or even worry about the market conditions. Keeping the process as simple as possible can also be key to sticking to it over the long term.
If you're worried about your retirement, it may be worth the effort to start making modest investments each week, as they can lead to life-changing returns later on.
Should you buy stock in Vanguard High Dividend Yield ETF right now?
Before you buy stock in Vanguard High Dividend Yield ETF, consider this:
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard High Dividend Yield ETF. The Motley Fool has a disclosure policy.
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