Are you looking for a safe investment? You can’t go wrong with a Warren Buffett-endorsed ETF

The stock market has been soaring recently, so now could be a great buying opportunity. But choosing the right investments is more important than ever.

Even shaky stocks can perform well when markets are strong, but they may not be able to weather periods of extreme volatility. Strong stocks of healthy companies are the most likely to bounce back from a recession and experience long-term growth, and investing in the right places can maximize returns while limiting risk.

Image source: The Motley Fool.

Everyone has different investment goals, which will affect where you buy. If protecting your savings is your top priority, investing in exchange-traded funds (ETFs) could be a smart choice. An ETF is a basket of securities grouped into a single investment. This means that when you buy just one share of an ETF, you are actually investing in dozens or hundreds of stocks at the same time.

There are many ETFs to choose from, but one in particular has the endorsement of Warren Buffett. Not only will it keep your money safer, but it can also help you earn hundreds of thousands of dollars over time.

Protect your investment portfolio

One of the safest and most reliable ETFs is S&P 500 ETF. This type of investment tracks the S&P 500. That is, it includes the same stocks as the index itself and aims to replicate its performance.

Stocks in the S&P 500 are some of the most powerful in the world. apologize and Amazon to Coca Cola and 3M. When you invest in an S&P 500 ETF, you immediately own shares of all 500 companies in the index.

Because only the best of the best stocks are included in the S&P 500, these investments have a better chance of recovering from periods of volatility. In the past 20 years alone, markets have experienced some of the worst recessions in history, from the bursting of the dot-com bubble to the Great Recession, the COVID-19 crash, and the most recent recession. But despite everything, the S&P 500 is still up nearly 250% since 2000.

^SPX data from YCharts

Warren Buffett also recommended this type of investment to minimize risk while building wealth. In fact, through the holding company Berkshire HathawayHe owns two S&P 500 ETFs. Vanguard S&P 500 ETF (flight 0.56%) and SPDR S&P 500 ETF Trust (spy 0.56%).

In 2008, he also famously bet $1 million that the S&P 500 could outperform a group of actively managed hedge funds. His investments earned a total return of nearly 126% over 10 years, while the average return for the five hedge funds at that time was only 36%.

There’s no such thing as a guaranteed investment, but the S&P 500 ETF comes pretty close. It has a decades-long history of generating positive total returns over time, and each ETF contains hundreds of stocks, allowing you to achieve an instantly diversified portfolio with little effort.

How much can you earn with the S&P 500 ETF?

Again, there are no guarantees when it comes to the stock market. However, historically the market itself has averaged returns of around 10% per year. This means that the annual highs and lows have averaged about 10% per year for several decades.

Let’s say you only invest $100 each month in an S&P 500 ETF with an average annual return of 10%. Here’s the approximate amount you could accrue over time at this rate:

Data source: Author’s calculations via investor.gov.

The sooner you start investing, the more returns you can potentially earn. Even if you can’t donate hundreds of dollars a month, the more time you put into saving money, the easier it will be to create a significant amount of wealth.

However, one potential downside to the S&P 500 ETF is that it may not yield above-average returns. It is impossible to beat the market because it is designed to follow the performance of the market. If that’s an important goal for you, investing in individual stocks may be a better strategy.

The S&P 500 ETF can be a fantastic option for those who want safer, more reliable, and less effort-intensive investments. If you start early and continue to invest, you can earn more in return than you think over time.