Part of the problem with investing in individual companies is that to do it well, it generally takes a lot of work. That's why ETFs can play such an important role in your plans. With a strong ETF, you can dramatically simplify the effort you need to make while still building a nest egg that can get you from $0 to millionaire status well within the span of a typical career.

That's what makes the Vanguard Total Stock Market Index ETF (NYSEMKT:VTI) such a compelling investment. With one simple transaction, you can get your hands on an investment that's like buying all the publicly traded American companies out there. That lets you virtually match the market's performance without having to pick the winners from the losers. Indeed, if you start investing in that ETF right now, it could make you a millionaire retiree by the time you need to tap your money.

Rising stack of coins with an arrow pointing upwards.

Image source: Getty Images.

Why it's such a great fund

Consistent with its name, the Vanguard Total Stock Market Index ETF seeks to match the U.S. stock market's overall performance.  It does so by buying a broadly diversified portfolio of stocks across market capitalizations and keeping its management expenses down to a mere 0.03%. That combination makes it super simple -- and super cheap -- for you to get stock market-like returns without the hassle of picking individual stocks.

While there are no guarantees in the market, over the long run, stocks have delivered total returns of nearly 10% annualized. If that keeps up, a single $10,000 investment can turn into $1,000,000 in about 48.3 years. While that's technically feasible within a working career, it would require a lot of patience and foresight to get there. It would also require you to make a substantial one-time investment early in your career, which might be tough to do.

A more realistic approach is to make ongoing investments over time, such as with every payday. If you can make regular monthly investments, the following table shows how many years it will take to get you from $0 to $1,000,000, depending on how much you contribute and what rate of return you earn.

Monthly Investment

10% Annual Returns

8% Annual Returns

6% Annual Returns

4% Annual Returns


























Data source: author.

What's so special about those monthly investment amounts?

egg with 401k written on it inside a trophy

Image source: Getty Images.

Those monthly investments weren't all chosen at random. Socking away $2,125 per month works out to $25,500 per year. That's the maximum an individual under age 50 is typically allowed to sock away across both an IRA and a 401(k) in the space of a year, at least in 2021. That means that amount of savings is achievable inside tax-advantaged accounts that let your money grow efficiently.

Similarly, $1,625 per month works out to $19,500 per year. That's the maximum annual contribution a person under age 50 is typically allowed to sock away inside a 401(k) in the space of a year in 2021. Likewise, the $500 per month works out to $6,000 per year. That's the maximum annual contribution a person under age 50 is typically allowed to sock away inside an IRA in the space of a year in 2021.

Perhaps even more importantly, that $250 per month works out to a little less than $10 per day. That's an amount in the reach of most people with steady income who are able to keep their cost of living fairly low. It's also enough to give you a fighting chance to get you to millionaire status by the time you retire even if you don't start saving with your very first paycheck.

And of course, if your income increases and/or your expenses drop over time (such as if you pay off debt or your kids become independent), you can increase the amount you sock away each month. That gives you the potential to move higher up that savings chart and potentially reach millionaire status all that much faster.

If you want, and have the ability, you can even sock away more than that using ordinary investment accounts instead of retirement-focused ones. That could even put you on track to become a millionaire even faster. All that is possible just by making regular investments in the Vanguard Total Stock Market Index ETF.

Isn't that risky?

a sack of cash balanced against different asset classes

Image source: Getty Images.

While investing in only a single stock is incredibly risky, remember that this ETF attempts to replicate the performance of the overall U.S. market. While stocks can both rise and fall and individual companies can fail, it is substantially less likely that the overall U.S. market will collapse and stay down for the long haul. If it does, chances are that we'll have bigger problems on our hands than just lower stock prices.

It's also important to recognize the difference between investing to build wealth and investing to protect the money you've accumulated or to generate spending cash. As you approach retirement and look to spend that money, you'll want to change your asset allocation strategy. Money you need to spend within the next five or so years does not belong in stocks, which means that at least some of your money should get out of that ETF as you get close to retirement.

Safer assets like cash, CDs, and investment-grade bonds will likely deliver lower levels of returns than you can anticipate from a stock-focused investment. What they will do, however, is provide you a higher level of certainty that the money you need to spend will be there when you need to spend it. Recognizing and planning for that trade-off can help you successfully navigate through the retirement that you've used the Vanguard Total Stock Market Index ETF to build up the nest egg in order to enjoy.

Get started now

By far, time is the most important asset you have at your disposal when it comes to your quest to build your million dollar retirement nest egg. The sooner you get started, the more you can let compounding do the heavy lifting for you and the less you have to sock away each month to reach your goal. So get started now, and improve your chances of reaching that incredible milestone.

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.