This low-risk ETF can turn $39,000 into $1 million in 25 years

Making money in the stock market doesn’t have to be complicated; the biggest obstacles to getting a great return often involve the investors themselves. Getting caught up in the latest meme hype, taking too many risks, or simply running out of patience are some of the main reasons why investors don’t get solid returns. Even if you don’t know what to invest in, there are exchange-traded funds (ETFs) that can help diversify your investment and reduce your risk.

A good example is the SPDR Selected Healthcare Sector Funds (NYSEMKT:XLV)which owns some of the largest healthcare companies in the world, including Johnson & Johnson, UnitedHealth Groupand Pfizer. It has outperformed the market for the past decade, and I’ll show you how investing $39,000 in the fund could potentially make you a millionaire.

The ETF has average returns of 14%

Over the past 10 years, the SPDR Health Care Select Sector ETF has generated total returns (including dividends) of 260%, which is higher than the S&P500, which has racked up returns of 224% over this period. This averages a compound annual growth rate of just under 14%.

And these returns take into account the recent bear market. It is perhaps not unreasonable to expect that the fund can continue to provide these types of returns in the future, as healthcare is one of the safest places to invest in; consumers will always need health care. Additionally, with aging demographics in the US, demand for healthcare services could soar even higher in the coming years, which means ETF returns could be even better in the future than they were. have not been in the past.

Reach $1 million

An investment growing at around 14% per year would take less than six years to double in value. And if the selected healthcare sector SPDR fund were to sustain those kinds of returns over the long term, investing $39,000 in the ETF could earn you $1 million after 25 years. The graph below shows you the progress of this investment over time:

Table by author.

Actual returns may and most likely will vary. You can also accelerate those returns by investing more money over the years. However, in this example, you only need to invest a lump sum at the start and simply let your investment grow over time. But by staying invested in the fund, you can eliminate the risk of picking individual stocks while potentially earning impressive returns along the way.

Why ETFs Make Sense for Most Investors

By investing in ETFs, you can achieve much better diversification than if you bought stocks yourself. An ETF allows you to easily concentrate most of your investment. You can still choose individual stocks, but a fund like XLV can be a pillar of your portfolio that plays a key role in its long-term growth.

Rather than having to pick which stocks to invest in at any given time and analyzing ratios and earnings reports, you can simply invest all the money you have into the fund. The SPDR Selected Healthcare Sector Fund has a modest expense ratio of 0.1%, which means you don’t incur large fees for putting your money in the ETF.

If you’re a long-term investor who wants to minimize risk or just want to invest in the stock market, the SPDR Health Care Select Sector Fund may be a great option.

10 stocks we like better than Select Sector Spdr Trust-The Health Care Select Sector Spdr Fund
When our award-winning team of analysts have stock advice, it can pay to listen. After all, the newsletter they’ve been putting out for over a decade, Motley Fool Equity Advisortripled the market.*

They just revealed what they believe are the ten best stocks investors can buy right now…and Select Sector Spdr Trust-The Health Care Select Sector Spdr Fund wasn’t one of them! That’s right – they think these 10 stocks are even better buys.

View all 10 stocks

* Portfolio Advisor Returns as of January 9, 2023

David Jagielski has no position in any of the stocks mentioned. The Motley Fool fills positions and recommends Pfizer. The Motley Fool recommends Johnson & Johnson and UnitedHealth Group. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


Not all news on the site expresses the point of view of the site, but we transmit this news automatically and translate it through programmatic technology on the site and not from a human editor.
Back to top button