The stock market can be intimidating at times, but investing is one of the simplest and most effective ways to build wealth that will last a lifetime.
While there are countless ways to invest, some require more effort than others. Investing in individual stocks can be a smart way to customize your portfolio, for example, but it requires a lot of research and maintenance — and it can be incredibly expensive to start.
Exchange traded funds (ETFs) may be a more accessible option, whether you’re new to investing or just want a low-maintenance option. An ETF is a basket of securities grouped into a single investment. So with just one fund, you’re investing in dozens or hundreds of stocks at once.
The right ETF for you will depend on your preferences and risk tolerance. But there is a proven Vanguard fund that is not only low risk, but could turn $300 a month into $592,000 or more with minimal effort on your part.
A powerful ETF that can create wealth without lifting a finger
If you’re looking for an investment that has stood the test of time, has less risk than many other ETFs, and can generate hundreds of thousands of dollars or more, a S&P500 ETF can be a smart option.
THE Vanguard S&P 500 ETF (NYSEMKT: VOL) follows the S&P 500 Index itself, meaning it contains the same stocks as the index and aims to reflect its long-term performance. The S&P 500 includes stocks of 500 of America’s largest companies, ranging from tech giants like Amazon And Apple to century-old brands like Coca-Cola And 3M.
S&P 500 ETFs are one of the safest ETFs on the market, and this type of investment has several distinct advantages:
Immediate diversification: Each S&P 500 ETF includes stocks from 500 companies across a wide variety of industries. By investing in a single ETF, you will instantly have a well-diversified portfolio. This can significantly reduce your risk, because if a few stocks, or even an entire sector, are in trouble, it won’t sink your entire investment.
A long history of success: The S&P 500 itself has a decades-long history of recovering from the worst crashes, bear markets and recessions. Although past performance is no guarantee of future performance, it is highly likely that the index will also bounce back from what the future holds.
Strong companies: Stocks in the S&P 500 come from some of the strongest companies in the world. While there’s no guarantee they’ll continue to see long-term growth, these stocks are among the best of the best.
Perhaps one of the most important advantages of this ETF is its ease and simplicity. All stocks are already chosen for you and this fund shows the best performance over time. This means you never need to research companies, follow industry trends, or decide when to buy or sell. Just invest whatever you can afford, stay invested for the long term and the fund will take care of the rest.
The Vanguard S&P 500 ETF, in particular, is also a good choice for its low expense ratio of just 0.03% per year. Many other funds charge fees of 1% or more per year, so this ETF could potentially save you thousands of dollars over time.
Building a $592,000 Portfolio
No one can say with certainty how the S&P 500 will perform in the coming weeks or months. However, historically the market has generated an average rate of return of around 10% per year. Although you probably won’t get a 10% return every year, the annual ups and downs could average around 10% per year over several decades.
Let’s say you invest in the Vanguard S&P 500 ETF and get an average annual return on your investment of 10%. If you invest $300 per month, here’s approximately how much you could accumulate over time:
Number of years | Total portfolio value |
|---|---|
20 | $206,000 |
25 | $354,000 |
30 | $592,000 |
35 | $976,000 |
40 | $1,593,000 |
Data source: Author’s calculations via invest.gov.
To reach $592,000 in total savings, you’ll need to invest consistently for about 30 years. But if you have more time to save (or can afford to invest more each month), you could potentially earn a lot more.
The Vanguard S&P 500 ETF can be a fantastic option for those looking to build long-term wealth with almost effortless investing. By starting early and giving your money as much time as possible to grow, you can build a portfolio worth several hundred thousand dollars or more.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Katie Brockman has positions in the Vanguard S&P 500 ETF. The Motley Fool holds positions in and recommends the Amazon, Apple, and Vanguard S&P 500 ETFs. The Motley Fool recommends 3M and recommends the following options: Long January 2024 $47.50 calls on Coca-Cola. The Mad Motley has a disclosure policy.
1 Magnificent Vanguard ETF to Turn $300 a Month into $592,000 by Barely Lifting a Finger was originally published by The Motley Fool
