Got $500 to Invest in Stocks? Put It in This ETF.

Do you have $500 (or $50 or $50,000) to invest and want to invest in stocks ? Good for you! It's hard to beat the stock market, after all, as a way to build long-term wealth. Like millions of people, though, you may not know where to start or how to invest in stocks.

If that sounds like you, consider investing in a simple, low-fee, broad-market index fund, such as one that tracks the S&P 500 index of 500 of America's biggest companies. Multiple exchange-traded funds (ETFs) fit that bill.

Image source: Getty Images.

Why stocks?

It's true that you might get lucky investing in a particular piece of real estate in a certain place at a certain time, or you might, against all odds, win a hefty sum in a lottery drawing. But if you want to grow your nest egg powerfully without taking on extreme risk, consider just sticking with stocks.

The research of Wharton Business School professor Jeremy Siegel supports that recommendation. Check out the table below, featuring returns of various asset classes between 1802 and 2021 -- that's 219 years!

Source: Stocks for the Long Run , by Jeremy Siegel.

Of course, our world today operates a little differently than it did in 1802. So consider that Siegel also found that over the 75 years between 1946 and 2021, stocks grew at an average annual rate of 11.3%, vs. just 5.8% for long-term government bonds.

It's worth noting, by the way, that these numbers aren't inflation-adjusted, and inflation will shrink your purchasing power over long stretches. Therefore, as you plan to save and invest for retirement , you might want to look into inflation-resistant investments or amass more money than you think you'll need for retirement .

Index funds: The easiest way to invest in stocks

Given that stocks outperform bonds over most long periods, it makes sense to put much or most of your long-term money in stocks. Be careful -- that doesn't mean investing in some individual stocks without doing a lot of research first. But most people probably don't have the time or interest to learn to study financial statements and evaluate stocks.

Fortunately, they don't have to do so. Instead, they can invest in one or more simple, low-fee, broad-market index funds , such as those that track the S&P 500. An index fund can be all you need to amass a fat nest egg. The table below makes that clear, assuming 8% annual growth:

Calculations and chart by author.

A great ETF: The Vanguard S&P 500 ETF

An excellent ETF that will get you quickly invested in the S&P 500 is the Vanguard S&P 500 ETF (NYSEMKT: VOO) . It has a tiny expense ratio (annual fee) of just 0.03%, so if you have $10,000 invested in it, you'll be paying only $3 per year in fees.

Since ETFs trade like stocks, you can buy as little as a single share (recently priced near $486) with your $500. Many brokerages will let you buy fractions of shares of stocks or ETFs, so if you only have, say, $200, you can still invest it in an S&P 500 index ETF.

Past results don't predict future results, but the table below shows that this ETF is no slouch -- and that's true for other low-fee index funds which track the S&P 500.

Source: Morningstar.com. *Since the Vanguard ETF hasn't been around for 15 years, this figure is from the SPDR S&P 500 ETF.

For an idea of what you'll find in any index fund that tracks the S&P 500, here are the Vanguard ETF's top holdings, as of late April:

Source: Vanguard.com.

It's a good idea to give any low-fee S&P 500 index fund serious consideration for your portfolio. Consider the Vanguard S&P 500 ETF, in particular, as it sports an exceptionally low fee.

Most people will need additional income beyond Social Security when it's time to retire, so it's vital to be planning for retirement and saving and investing for it, too. Whether you start with $500, $50, or $50,000, do start and keep adding to it.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Selena Maranjian has positions in Alphabet, Amazon, Apple, Berkshire Hathaway, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Meta Platforms, Microsoft, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy .