Many people think that to end up a millionaire, they need to build a complex portfolio full of carefully selected stocks. And while that may, in fact, be one ticket to millionaire status, it's also possible to grow a tremendous amount of wealth without doing a lot of work at all. If that sounds like a good option to you, then it pays to look at the Vanguard S&P 500 ETF (VOO +1.23%).
The upside of investing in the S&P 500
The S&P 500 index consists of the 500 largest publicly traded companies, so it's a great representation of the broad market. When you invest in the S&P 500, you don't just add quality stocks to your portfolio -- you also get instant diversification.
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The Vanguard S&P 500 ETF tracks the S&P 500. (If you're not familiar with ETFs, that's short for exchange-traded funds. These funds follow different market indexes and let you scoop up a bucket of stocks with a single investment. It really doesn't get more convenient than that.)
Now the bad news is that the fund's goal isn't to beat the S&P 500. The good news, however, is that the S&P 500 has had a strong performance over time, and so matching it is a good benchmark to aim for. In fact, the Vanguard S&P 500 ETF has delivered an average annual 15% return since its inception.
How a single ETF could make you a millionaire
The Vanguard S&P 500 ETF is a great choice as an investment, but let's be clear -- you'll need to stick with it for a long time for it to turn you into a millionaire.
But let's assume you put $10,000 into that ETF and leave your money alone for 35 years. If that 15% average annual return holds, you'll wind up with $1.33 million. Keep your $10,000 invested for 40 years, and you'll be looking at almost $2.7 million.
Of course, not everyone has $10,000 on hand to sink into a single ETF. So let's say that instead of a lump sum investment, you buy shares over time. If you invest $100 a month over 35 years, you'll wind up with just over $1 million -- again, assuming the fund delivers that same average annual 15% return during that window.
An easy ticket to wealth
The Vanguard S&P 500 ETF isn't the only S&P 500 ETF you can scoop up. But it's a good choice if you want to accrue a lot of money without having to put a lot of thought or effort into it. Of course, hand-picking a select group of S&P 500 stocks could give you a significantly higher return over time than what the Vanguard S&P 500 ETF will give you. But if you're happy with the idea of a 15% yearly return and you're not looking to spend a lot of time researching companies and updating your portfolio, then this is one investment that could end up serving you very well for many years to come.
