There are many ways to become a millionaire. One of the best is simply investing in stocks – for the long term.
However, you don’t want to just pick a stock or buy a stock if it is overvalued. That can leave many of us wondering what to do.
Enter the Vanguard S&P 500 ETF(NYSEMKT: VOO) — a simple one S&P500 index fund that can make you a millionaire.
Image source: Getty Images.
Here’s some information about what this ETF is and what it can do for you.
First, the Vanguard S&P 500 ETF is an exchange-traded fund (ETF) – a fund that trades like stocks. It’s also an index fund, which aims to deliver the same performance (minus the small fees) as the S&P 500 index of 500 of America’s largest companies. The ‘expense ratio’, or annual fee, is just 0.03% – which will cost you $3 per year for every $10,000 you have in the fund.
How has this ETF performed in the past? Review the table below, but remember that past performance is no guarantee of future results. (Also, any low-fee S&P 500 index fund, such as those from Fidelity, Schwab, or other good financial companies, will achieve similar results.)
Period
Average annual profit
Last 3 years
11.02%
Last 5 years
16.26%
Last 10 years
14.04%
Last 15 years
13.95%*
Source: Morningstar.com, as of October 21, 2024. Chart by author. *Since the Vanguard ETF has not been around for 15 years – the date of inception was September 7, 2010 – this figure comes from the SPDR S&P 500 ETF(NYSEMKT: SPY).
Here are the top holdings of the Vanguard S&P 500 ETF, as of the end of September – and they’ll be the same for virtually every other S&P 500 index fund, too:
Source: Vanguard.com. As of September 30, 2024. Chart by author.
If you’re an admirer of the “Magnificent Seven” stocks for their impressive performance over many years, you might be happy to know that all seven – Apple, Microsoft, Google parent Alphabet, Amazon.com, Nvidia, Facebook – parent company Meta Platforms and Tesla are in the Vanguard S&P 500 ETF. If you buy shares of the index fund, you will have positions in all seven – plus 493 other major companies.
How exactly can the Vanguard S&P 500 ETF grow your wealth to $1 million (or more)? Let’s analyze some numbers. And despite the wonderful average annual returns in the table above, which range from about 11% to 16%, let’s be more conservative.
The S&P 500 has averaged annual returns closer to 10% over long periods of time (ignoring inflation). Over your specific investment period, this may be more or less average. So let’s go with 8%. Here’s how your money can grow at that rate over time:
As the table shows, you can reach seven figures within 20 to 30 years, depending on how much you throw away, and whether you do it every year. You may be able to become a millionaire even faster if you can save and invest even larger amounts.
If you don’t want to focus all your long-term dollars solely on the S&P 500, there are plenty of other exciting, high-performing ETFs to consider. For example, take a look at one of the following and perhaps park some of your portfolio in one or a few of them. Just know that when funds focus more on fast-growing, high-tech companies, they can be more volatile.
Vanguard Information Technology ETF (VGT)
Vanguard Growth ETF (VUG)
SPDR Portfolio S&P 500 Growth ETF (SPYG)
VanEck Semiconductor ETF (SMH)
However you choose to invest your long-term money, make sure you do so to build savings for retirement. A simple S&P 500 index fund may be all you need.
Consider the following before buying shares in Vanguard S&P 500 ETF:
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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. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Selena Maranjian has positions in Alphabet, Amazon, Apple, Berkshire Hathaway, Broadcom, Meta Platforms, Microsoft, Nvidia and Vanguard Index Funds – Vanguard Growth ETF. The Motley Fool holds and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Meta Platforms, Microsoft, Nvidia, Tesla, Vanguard Index Funds – Vanguard Growth ETF and Vanguard S&P 500 ETF. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Is This Vanguard ETF a Millionaire Maker? was originally published by The Motley Fool
