The last several months have been a rollercoaster for Dogecoin (CRYPTO:DOGE), with its price increasing more than 5,500% since the beginning of the year. And despite its recent downturn, its price has been steadily climbing, once again.
Investments like Dogecoin can be tempting because of their explosive price increases. But high-reward investments are also often high risk, and Dogecoin is no exception. It’s more challenging than it may seem to make a lot of money with this investment, but fortunately, there’s another way to become a millionaire investor.
Image source: Getty Images.
Why is Dogecoin so risky?
Dogecoin’s meteoric gains are primarily due to its passionate followers buying the cryptocurrency in droves. The more people buy, the higher the price climbs.
Right now, however, Dogecoin’s fundamentals don’t align with its price. While it’s gaining steam in the crypto space, it doesn’t have a strong competitive advantage. Cryptocurrency, in general, is still highly speculative, and Dogecoin will need to find ways to compete with the bigger players in the industry, Bitcoin and Ethereum, if it wants to survive over the long term.
That doesn’t mean you can’t make money with Dogecoin, but it’s difficult. The cryptocurrency’s price gains may not be sustainable, and it could crash sooner or later. If you don’t sell at just the right moment, the price could plummet and you’ll lose most or all of the money you’ve invested.
The good news is that it’s possible to get rich in the stock market — as long as you’re choosing the right investments. And there’s another type of investment that could make you a millionaire with much less risk involved — an S&P 500 ETF.
Why invest in S&P 500 ETFs?
An S&P 500 ETF is an investment that tracks the S&P 500 index and includes all the stocks within this index. Many of these companies are household names and are also some of the largest and most successful organizations in the U.S., such as Amazon, Apple, and Microsoft.
S&P 500 ETFs are also among the safest types of investments. Although they’re subject to short-term volatility (like any investment), they have a long history of earning positive returns, despite market crashes and corrections.
In other words, by investing in an S&P 500 ETF, it’s very likely you’ll earn positive returns, on average, over the long run. In fact, the index has a long-term average annual return of 10%. So no matter what the market does, there’s a good chance your investments will be able to recover.
How much can you earn with this investment?
The best part about investing in S&P 500 ETFs is that they’re low-maintenance investments that have the ability to supercharge your savings. Say, for instance, you currently have no savings but start to invest $100 per week (or $400 per month) in an S&P 500 ETF. Assuming you’re earning a 10% average annual return on your investments, here’s approximately how much you’d have over time:
| Number of Years | Total Savings |
|---|---|
| 5 | $29,000 |
| 10 | $75,000 |
| 20 | $275,000 |
| 30 | $790,000 |
| 40 | $2,124,000 |
Calculations by author via Investor.gov.
By continuing to invest for as many years as possible, your money will grow exponentially. With enough time, you could even become a multimillionaire with this type of investment.
Also, because S&P 500 ETFs are hands-off investments, you can grow your savings with next to no effort. Simply invest as much as you can afford each month, then sit back and watch your money grow.
Dogecoin may have a lot of hype surrounding it, but it can also be dangerous. S&P 500 ETFs, on the other hand, are tried-and-true investments that pose far less risk. By choosing the right investments, you can earn more than you might think — and you may even reach multimillionaire status someday.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
