Investing in the stock market could turn $10,000 into $300,000. Here’s how

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Woman looks amazed and shocked as she looks at her laptop.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

You may be looking at your portfolio’s performance over the past eight months or so and scratching your head, wondering when the pain will end. But when you are investing for retirement or some other goal down the road, it is imperative to understand the power of a long-term investment strategy.

There have been 27 bear markets since 1929, with a bear market defined as the market declining 20% or more during a specific time period. There have also been 27 bull markets since 1929, and they last much longer — about 2.7 years on average compared to less than 10 months for bear markets.

Furthermore, stocks lose on average about 36% during bear markets and gain 114% during bull markets. So this just shows that the odds are in your favor over the long run. Also, bear markets are typically a good time to buy, as you can invest in high-quality, established growth companies at discounted prices. With that in mind, let’s take a look at how a $10,000 investment right now could turn into more than $300,000 over time.

There have been five bear markets in the past 20 years

For the purpose of this hypothetical, let’s go back 20 years and see how much a $10,000 investment in the Nasdaq 100 would have yielded. In that time, there have been five bear markets — in 2002, 2008, 2009, 2020, and 2022.

The Nasdaq 100 is a growth-oriented index that includes the 100 largest stocks on the Nasdaq exchange, except financial stocks. The index is heavily skewed toward technology stocks — since they have generally been the largest and fastest growing — and is often considered a bellwether for the performance of the technology sector.

The Nasdaq 100 would be a great index to invest in, because growth stocks have outperformed value stocks over the long term, and technology stocks in particular have been the best-performing sector over time. With a long time horizon ahead of you, you can ride out bear markets and generate excellent returns.

The best way to tap into the Nasdaq 100 would be through an exchange-traded fund (ETF). And one of the most popular ETFs over the past 20 years is the Invesco QQQ (NASDAQ: QQQ), which tracks the Nasdaq 100.

So back to our hypothetical — if you’d invested $10,000 in the QQQ back on July 22, 2002, you would have invested in the middle of a bear market — one that didn’t end until Oct. 2002. Sound familiar?

Through it all, a $10,000 investment would net $300,000

From July 22, 2002, until today, the QQQ has posted an annualized return of 13.6%. If you’d invested $10,000 in the QQQ 20 years ago, and contributed $125 per month to that fund, you would have about $303,000 right now.

Keep in mind, that performance is through five bear markets, including the one we are currently in. This preceding 20-year period is particularly relevant now, because the investment would have started in the midst of a bear market.

Now, you know the disclaimer: Past performance is not indicative of future results, and there is no guarantee that an investment in the Nasdaq 100 will return 13.6% over the next 20 years. But history is indeed a useful guide to understand that volatility and down markets are a fact of life — and patience has typically been rewarded. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Investing in the stock market could turn $10,000 into $300,000. Here’s how appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.* Scott just revealed what he believes could be the “five best ASX stocks” for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now

See The 5 Stocks
*Returns as of July 7 2022

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

from The Motley Fool Australia https://ift.tt/3X4rEdV

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s