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Nowadays, many investors are jumping on the cryptocurrency bandwagon. And if you’re considering adding digital coins to your wallet, you might have your eye on Bitcoin (CRYPTO: BTC) in particular.
Bitcoin is one of the most well-known cryptocurrencies, and although its value has changed dramatically this year, many see it as a viable investment and a solid opportunity to make money. But before you invest any money in Bitcoin in the hopes of making you a millionaire, here’s another lucrative – and less risky – investment worth considering.
Invest in the vast market
While it is possible to make a lot of money with Bitcoin, there is also a safer way to build enough wealth to become a millionaire – investing in the wider stock market. Specifically, loading S&P 500 index funds could make you very, very rich without taking on the risks associated with investing in cryptocurrency.
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Index funds are passively managed funds that aim to match the performance of the stock market indices to which they are associated. Meanwhile, the S&P 500 is a stock market index made up of the 500 largest publicly traded companies as measured by market capitalization.
S&P 500 index funds are designed to do as well as the S&P 500 itself. And if you invest in it, you could easily become a millionaire several times.
Over the past 30 years, the S&P 500 Index has generated an average annual return of 10.7%. This does not mean that the index has performed well every year. In fact, during this time he experienced several years with negative returns.
But if we assume that the index is capable of producing comparable returns over the next three decades and you invest $ 500 per month in S&P 500 index funds that offer an average annual return of 10.7% on a 30-year period, you with $ 1.13 million. Earn $ 1,000 per month and you’ll have $ 2.25 million to enjoy.
What makes the S&P 500 a safer investment than Bitcoin? It’s easy – it’s been around longer, and it has a long history of recovering from downturns and rewarding investors who stay the course. Because Bitcoin has only been around for a little over a decade, we don’t know what kind of stamina it has.
Additionally, the future value of Bitcoin will largely depend on the extent of demand, and for demand to remain strong, Bitcoin must become a widely accepted form of currency. But it’s too early to say whether or not that will happen, so if you’re looking for a way to build solid wealth without having to expose yourself to a world of risk, S&P 500 index funds can be a much better bet.
To be clear, that doesn’t mean you shouldn’t invest money in Bitcoin. But it still pays to put most of your assets on the stock market, and S&P 500 index funds are a great way to invest there for the long term.
This article represents the opinion of the writer, who may disagree with the official recommendation position of a premium Motley Fool consulting service. Were motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
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