Motley Fool: Consider investing $1,400 stimulus check if you don't need it right away

This post was originally published on this site

Lawmakers in Washington are moving quickly to provide a third stimulus check. This one will be larger than either of the prior two COVID-19 payments. In fact, eligible adults and dependents are likely going to get $1,400 each. This money could be delivered as early as mid-March or the beginning of April.

These stimulus checks are meant to help families struggling with the ongoing impact of the coronavirus. If you need yours to pay bills or don’t yet have an emergency fund, you should absolutely use the funds to cover your living costs or prepare for a rainy day.

But if you don’t need the money now and won’t within the next few years, you could easily turn that $1,400 into $2,800 or more — with very little effort. Here’s how.

Image source: Getty Images.

You can double your stimulus check in under a decade

If you want to double your stimulus check in under a decade, there’s just one thing that you need to do. Invest it in a fund that tracks the S&P 500 index (SNPINDEX: ^GSPC).

The S&P 500 consists of just over 500 of the largest publicly traded companies in the U.S. There are a number of index funds that track the S&P 500, most of which have extremely low expense ratios.

Over the past 50 years, the S&P 500 has provided a 10.9% average annualized return. And anyone who invested in it and left their money alone for at least 20 years has made a profit, regardless of when they first put their money in. So while there’s always some risk with investing, the chances of big losses are very small if you invest your stimulus money into a fund tracking the S&P 500 and leave it alone for a while.

Just how long, exactly, would you have to leave your $1,400 invested in order for it to double? If you earn the average 10.9% returns the S&P 500 has historically provided, you could double your $1,400 in 7.27 years.

Now, that’s a relatively short timeline, so it’s possible your returns may be a little lower (or a little higher). But since the S&P 500 has been pretty consistent, even if your investment underperforms a bit, you can feel extremely confident that by the end of a decade, you’ll almost assuredly have at least doubled your money.

And if you wait a little longer — say 20 years — your odds of earning the 10.9% annualized return are even higher. At the end of two decades, you’d most likely be looking at a balance of just over $11,000 — almost eight times the amount you started with.

Of course, you might be able to do even better if you aim to outperform the market by developing a smart investment thesis and making a long-term investment in individual stocks you believe will beat the market. But if you don’t want to do any work beyond just taking a few minutes to pick an S&P index fund, you can feel pretty good about your ability to effortlessly double your stimulus check before 2030.

10 stocks we like better than Walmart

When investing geniuses David and Tom Gardner have an investing tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now… and Walmart wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

See the 10 stocks

Stock Advisor returns as of 2/1/20

The Motley Fool has a disclosure policy.