Most Americans Are Missing Out on This Huge Investment Opportunity

If your goal is to grow your wealth over time, you can take a few different avenues. You could keep your money in CDs to play it safe and enjoy modest interest earnings. You could also buy bonds and enjoy predictable interest payments. 

But one of the most effective ways to grow wealth over time is to invest in stocks. That's because the stock market has a long history of delivering strong returns. 

Yet as of 2022, only 21% of Americans were invested in stocks directly, according to Federal Reserve data. And that means most Americans may be selling themselves short financially.

Why skipping stocks means losing out

It may be that more than 22% of Americans are actually invested in stocks when we account for pooled investment funds and other managed assets, says the Federal Reserve. But still, it's probably fair to say that a good percentage of the population doesn't own stocks in any shape or form. And that's a problem.

While CDs and bonds can help you grow your money over time, that growth may be fairly slow. The stock market, on the other hand, has generated an average annual 10% return over the past 50 years, as per the performance of the S&P 500 index. Simply put, if you don't invest in stocks at all, you risk ending up with limited savings and income for retirement.

To show how problematic it is to steer clear of stocks, imagine you save $250 a month for retirement over a 35-year period. If you stick to safer assets like CDs and bonds, you may only see an average annual 4% return in your portfolio, leaving you with a nest egg worth about $221,000.

Now sure, that's a decent amount of money. But remember, it may have to last for 20 years or more.

However, if we apply a 10% return to the scenario above, investing $250 a month over 35 years could leave you with $813,000. So it's worth strongly considering stocks for that reason. 

And if you're worried about the risks involved, remember that the 10% return we just discussed accounts for both good market years and bad. If you invest in stocks over a long period, you have opportunities to ride out market downturns and make money in the long run.

How to invest in stocks the easy way

By now, I hope you're convinced that you're doing yourself a disservice by not putting money into stocks. But the process of putting together a stock portfolio may seem overwhelming. 

If so, you should know that there's a pretty easy way to invest in stocks without having to do a ton of research or legwork. You can simply buy S&P 500 index funds through a retirement plan like an IRA or 401(k). 

Index funds try to match the performance of an existing market index, like the S&P 500. The reason this particular index is worth investing in is because it consists of the 500 largest publicly traded companies in the market today. So you're putting your money into not just strong businesses, but also, a diverse mix of companies. 

You might think you're doing yourself a favor by avoiding stocks. That way, you can minimize your risk. But if you don't invest in stocks, you run a different risk -- not having enough retirement savings. 

If you want to help ensure you'll be able to retire comfortably, then it's time to get on board with the idea of putting some of your money into the stock market.