Over the past 10 years, the S&P 500 index (^GSPC -0.18%) generated a total return of 322% (as of Aug. 5). A starting sum of $10,000 would be worth more than $42,000 today.
But there’s one simple move that would’ve boosted this already impressive return. Here’s one habit that has helped average investors build substantial wealth in the stock market.
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Instead of purchasing an S&P 500 exchange-traded fund (ETF) one time and forgetting it, the best investors utilize a strategy known as dollar-cost averaging (DCA). This involves allocating capital at regular intervals, like monthly, which builds a habit of consistent investing.
And the best part is that investors do not need to time the market, which typically results in more harm than good for their portfolios. Instead, you take advantage of multiple entry points, whether that means periods of bull-market enthusiasm or during bear-market dips. It’s almost like building an automated investment process.
Today’s Change
(-0.18%) -13.59
Index Level
7,709.96
Key Data Points
Day’s Range
7,698.15 – 7,742.85
52wk Range
6,316.91 – 7,793.68
The results speak for themselves. If you invested $10,000 in an S&P 500 ETF a decade ago, but also bought $100 more every single month, then you’d have almost $69,000 today. This figure is about 65% higher than the approach that didn’t involve the DCA method.
If you were able to allocate even more on a monthly basis, then the returns would have been significantly higher. Keep this in mind as you consider adjusting your own strategy.
Neil Patel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.