Making money in the stock market can be easy even if you’re not good at picking stocks

Investing in the stock market is a proven way to build wealth over time. But many times, investors become disillusioned because their returns were underwhelming or because they lost money on stocks and investments they thought should be good buys.

Investors can get burned even with seemingly safe investments. 3M This is the stock that comes to mind when you think of it. It’s been a solid brand and business for decades, but now legal troubles have forced it to split its operations and cut its dividend, which has looked incredibly safe for years. Walgreens Boots Alliance This is another once-safe stock that had to cut its dividend earlier this year.

Investors who recently purchased the stock are probably disappointed after its short time on the market. This is especially true if you have made the mistake of only holding on to a few stocks without diversifying your investments.

Stock screening can be risky and time-consuming.

Investors who have grown tired of one or two stock picks may have learned that picking individual stocks can be risky. But it is The pursuit of large profits and efforts to beat the market are what attract many investors.

It was this gamification of stocks that led the late Charlie Munger, Warren Buffett’s right-hand man in 2021, to mockingly compare the erratic behavior of the stock market to behavior someone might observe in a casino. And betting on high-risk stocks can be a risky strategy. Risk is real in the stock market. (Check out this page if you need help understanding your risk tolerance.)

Even blue chip stocks can sometimes deliver disappointing returns to investors. And while many investors can outperform the market by diversifying and holding a large number of stocks, it’s not an easy strategy to do on your own, especially if you don’t have the time or real interest in tracking all of your investments. so.

Many investors are better off sticking to a variety of exchange-traded funds.

A more suitable strategy for many investors may be to purchase exchange-traded funds (ETFs) that track different sectors of the market. ETFs give you exposure to a variety of assets rather than dozens. hundreds Stocks with a single investment

for example, SPDR S&P 500 ETF Trust (spy -0.12%) track S&P 500 You can benefit from the overall performance of the market. Each stock represents a small portion of the fund, so you don’t take on excessive risk with a single investment.

And with an expense ratio of only 0.09%, the costs are not high. Over time, the composition of the fund may change as new growth stocks emerge and others struggle. Holding on to a fund’s stocks is an easier way to keep up with market changes than staying abreast of business news and developments.

Although there are inevitably downturns and recessions, tracking the S&P 500 is a sure-fire way to grow your wealth over time. Since 2000, the SPDR S&P 500 ETF Trust is up 264%. And taking dividends into account, the total return is about 466%.

Of course, the downside is that if you invest in a fund that reflects the S&P 500, surpass that. If you’re confident in your stock-picking abilities, creating your own custom portfolio may still be your preference. But this is not the only way to make money in the stock market.

Investing in stocks doesn’t have to be complicated

Ultimately, your investment strategy can be as simple or complex as you want. Want to invest in dozens or hundreds of stocks and not worry about keeping track of every company? Go the ETF route. Do you observe the stock market every day and are well informed about the latest trends and developments in the market? Do you know what makes stocks undervalued or overvalued? If so, picking individual stocks may be a better option.

There is no one-size-fits-all strategy that will work for everyone. And if your goal is to generate good returns without beating the market, choosing an ETF that reflects the S&P 500 may be the optimal strategy.