Billionaire investors have reached their investment successes through many years of smart stock picking. They've generally chosen the right stocks and industries at the right moments and have held on for the long term. For example, many saw the artificial intelligence (AI) boom accelerating, so scooped up shares of key players such as chip leader Nvidia or software company Palantir Technologies -- those stocks have soared 180% and 290%, respectively, this year.
That's why, to get some inspiration for our own portfolios, it's a great idea to take a look at what these experienced investors are buying. And the fantastic news is you don't have to be a billionaire to invest like one. You can easily adapt these experts' ideas to your own budget and strategy.
In recent weeks, billionaires David Shaw of D.E. Shaw and Co., Israel Englander of Millennium Management, and Ray Dalio of Bridgewater Associates all made a move that could be particularly interesting for the rest of us to follow. That's because you can start off with a small investment in this particular asset, add to it over time, and potentially generate hundreds of thousands of dollars in returns. Meet the investment these billionaires are buying that could turn $300 per month into $1 million.
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Investing in companies that power the economy
This particular asset actually allows you to invest in all of the biggest companies powering today's economy with just one easy move. This year, it's heading for a 26% gain exactly like the S&P 500. And for one good reason: This investment tracks the performance of the benchmark. It's the SPDR S&P 500 ETF Trust (SPY -1.05%), an exchange-traded fund that includes all S&P 500 companies.
In the third quarter, these billionaires made the following moves:
- David Shaw increased his holding of the SPDR S&P 500 ETF by 256% to 498,167 shares.
- Israel Englander boosted his holding of the SPDR S&P 500 ETF by 81% to 5,566,606 shares.
- Ray Dalio lifted his holding of the SPDR S&P 500 ETF by 18% to 836,965 shares.
This move by Shaw, Englander, and Dalio could be seen as a sign of confidence in the general market as we head toward the new year. That's because, by increasing their positions, these billionaires are increasing their exposure to the top companies driving growth today. And these famous investors clearly view this ETF as a long-term part of their portfolio: Shaw initiated his position in 2006, and Englander and Dalio first picked up the shares in 2008 and 2007, respectively.
Why hold for the long term?
Why hold onto the S&P 500 ETF for the long haul? The fund and index it tracks add or delete members according to the current situation -- so they remain true representations of the day's economy. And this means that over time, this ETF will continue to offer investors exposure to the world's top companies.
Today, the most heavily weighted industry in the ETF is information technology, and the most heavily weighted shares are Apple, Nvidia, and Microsoft. But this might change in the future according to the industries and companies driving growth. At the same time, the ETF always will offer you diversification across industries -- a total of 11 -- so this isn't a bet on just one sector or player. And that adds a certain element of safety to this investment.
Maximize your potential returns
On top of this, when investing in the SPDR S&P 500 ETF, you can take advantage of the magic of compounding to maximize your potential returns. The S&P 500 has delivered an annualized average gain of 10% since its debut as a 500-company index in the late 1950s. Let's imagine this continues. If you initially invest $1,000 in the ETF and then go on to invest $300 per month in it for 35 years, the value of your investment could reach $1 million.
You could, of course, scale any part of this plan up or down -- from the initial investment to the timeframe -- but in any case, if you commit to it for a number of years, you could score a significant win. All of this means the recent move of certain billionaires to increase bets in the SPDR S&P 500 ETF may be seen as a positive sign for what's ahead, but even better, it reinforces the idea of investing in quality companies over the long term.
