Can you retire a millionaire with ETFs alone?

You don’t have to beat the market

It’s a common belief that investors get rich by picking individual stocks and beating the market. While that can be true, stock picking isn’t the only path for investors to build wealth. Funds — ETFs in particular — can also make you a millionaire, even though many of them never beat the market.

In truth, the broader market provides enough growth potential to build a seven-figure retirement fund. Follow the four rules below to harness that market power and achieve your wealth goals without having to pick a single stock.


1. Choose efficiency

Funds have administrative expenses that they pass along to shareholders. Those expenses dilute the returns of the underlying stock portfolio. If you choose cost-efficient funds, a greater portion of the ETF’s earnings flow through to your bottom line.

Expense ratio is the metric you’ll use to compare funds on cost efficiency. You’ll see this number presented as a percentage that’s some fraction of 1%, say 0.10%. A 0.10% expense ratio equates to expenses of $10 for every $10,000 you have invested.

Some index ETFs have expense ratios that are close to zero. iShares Core S&P 500 ETF and Vanguard S&P 500 ETF, for example, both have expense ratios of 0.03%.

If your 401(k) doesn’t offer low-cost ETFs, ask your administrator if your account has a brokerage window. Or, invest in these funds in an IRA or taxable brokerage account instead.

2. Plan your asset allocation

Asset allocation is the composition of your portfolio across different asset classes, like stocks and bonds. Stocks deliver growth, with some risk, while bonds provide stability. You can mix and match the two to tailor your portfolio’s risk and reward characteristics.

Since you’re targeting millionaire status by retirement, you’ll want a higher percentage of stock ETFs versus bond ETFs. If retirement is still decades away and you can handle some volatility, you could hold up to 90% stock funds. Start with a lower percentage if retirement is within 15 years or if stock market volatility makes you nervous.

3. Invest generously and consistently

To amass seven figures with ETFs, you must invest generously and consistently — for decades. The numbers below show monthly contributions required to get to $1 million on different timelines. Note that the monthly contributions could include your…

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