Investors new to the stock market might think that the path to wealth is picking single companies that can be tomorrow's winners. This isn't true. There are passive investment vehicles, such as some exchange-traded funds (ETFs), that can provide certain kinds of exposure in your portfolio.
And there's one unstoppable ETF that made its investors millionaires in the past decade. You just had to put $3,700 to work each month to join the seven-figure club.
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Buying an S&P 500 ETF has worked out well
Since late January 2016, the Vanguard S&P 500 ETF (VOO 1.53%) has generated a total return of 336%. That works out to just under 14% annually, significantly above its historical average of 10% per year. If you had bought $10,000 worth of this ETF 10 years ago, you'd have more than $43,610 today. Gaining exposure to the S&P 500 has been a smart move, as investors are essentially betting on the American economy to continue succeeding in the future.
Investors who adopted a dollar-cost average (DCA) strategy figured out a way to seriously boost their gains. If you purchased $3,700 of the Vanguard S&P 500 ETF every month from January 2016 through December 2025, equating to a total of 120 allocations, you'd have a cool $1 million.
The beauty of the DCA approach is that investors eliminate the need to correctly time the market. Instead, they just buy at recurring intervals, regardless of whether the market is ripping higher or if it's in a bear market. By doing this, investors develop a consistent habit of putting money to work in the stock market, which has clearly proven that it can create substantial wealth over time.
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Key Data Points
Looking at the past and the future
The Vanguard S&P 500 ETF registered above-average returns in the last 10 years due to favorable tailwinds. Capital that has flocked to passive investment vehicles is one powerful trend that can't be overlooked. This introduces a lot of demand for stocks. Democratization of access to brokerage accounts and the generally subpar performance of active managers support the move by investors to go for simple and low-cost options.
The economy is different these days than at any point in the past. The technology sector is massive. And businesses that operate in related industries have grown rapidly, generate robust free cash flows, and possess wide economic moats.
It doesn't look like these tailwinds are going away. And they could continue to lift the Vanguard S&P 500 ETF higher in the next decade and beyond. However, investors hoping for monster returns should bring their expectations back to reality.
