If You'd Invested $1,000 in the Stock Market 5 Years Ago, Here's What You'd Have Today

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You'll often hear that the key to growing wealth, whether for retirement or another purpose, is to invest your money in the stock market despite the risks involved. If you play it too safe and limit yourself to vehicles like certificates of deposit (CDs) and bonds, you risk falling short of your goals.

But what if you're not comfortable hand-picking stocks for a portfolio? That's totally understandable. You may not have the background in investing to confidently choose one company's shares over another. And you may not have the time it takes to research stocks individually.

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The good news is that you can do quite well for yourself by investing in the broad market instead of individual stocks. In fact, putting money into an S&P 500 ETF, or exchange-traded fund, is a great way to grow wealth without having to do much thinking at all.

It pays to go broad

When you hear people on TV talking about how the stock market did on a given day, they're often talking about the S&P 500 index. The S&P 500 consists of roughly the 500 largest publicly traded companies today. And if you buy shares of an S&P 500 ETF, you're basically putting your money into those 500 largest companies without having to go out and buy shares of each one.

How well might you fare if you focus your investment strategy on the S&P 500? Well, over the past 50 years, the index has delivered an average annual 10% return. That accounts for years of strong performance and major market crashes. And in recent years, the S&P 500 has rewarded investors even more.

The S&P 500, as of this writing, is up 85% over the past five years. This means that had you invested $1,000 in the S&P 500 five years ago, you'd be sitting on $1,850 today. Considering that means you would've almost doubled your money, that's pretty impressive.

But it's also worth noting that the past five years haven't been completely smooth sailing for the S&P 500. In 2020, the stock market experienced a short-term but notable crash when the COVID-19 pandemic took hold. And in 2022, inflation-related fears fueled a substantial sell-off, driving portfolio values down.

In spite of all of this, the S&P 500, still managed to rise 85% over the past five years. And while you may have gotten even higher returns with a portfolio of individual stocks if you'd picked all the right ones, 85% isn't a bad consolation prize.

Aim to invest on a long-term basis

Of course, the S&P 500's return over the past 50 years isn't quite as impressive as its return over the past five. The point, however, is that putting your money into the broad market could be a fantastic strategy if the idea of hand-picking stocks doesn't sit well with you.

To be clear, though, your best bet in investing in stocks is to do so over many years -- not just five. If you put $1,000 into an S&P 500 ETF that delivers a 10% yearly return over a 45-year period, you'll be looking at a portfolio worth almost $73,000. That's a huge gain.

Plus, the longer your investment window, the better positioned you are to ride out periods of stock market turbulence, like the ones discussed above. So in addition to going all-in on S&P 500 ETFs, pledge to keep your money invested for as long a period as possible.

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