The right investment can be life-changing, potentially turning just a few hundred dollars per month into millions over time. Exchange-traded funds (ETFs) are ideal for those seeking a low-maintenance, long-term investment. Each fund contains dozens or hundreds of stocks, providing instant diversification with minimal effort on your part.
While there are many ETFs to choose from, this Vanguard fund can provide stability while potentially setting you up for life.
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A powerhouse investment to protect your savings
If you're looking for a relatively safe and stable investment for long-term growth, you can't go wrong with the Vanguard S&P 500 ETF (VOO 1.28%). This fund tracks the S&P 500 (^GSPC 1.30%), holding stocks from all 500 companies within the index.
There are a few reasons why an S&P 500 ETF can be a safe yet powerful investment:
- It provides plenty of diversification: The S&P 500 itself includes companies across all sectors of the market, which can help limit risk. If one industry is hit harder than the rest during a downturn, there are plenty of other stocks to help prop up the fund and protect your portfolio.
- It has an impeccable track record: According to analysis from Crestmont Research, the S&P 500 has posted positive total returns in every single 20-year period in its history. This means that by holding an S&P 500 ETF for at least 20 years, you're incredibly likely to see positive total returns -- even if the market is volatile in that time.
- It focuses on industry giants: The companies within the S&P 500 are among the largest and strongest in the U.S., which can further protect against risk. While even industry-leading juggernauts are susceptible to market volatility, they're far more likely to recover.
The S&P 500 ETF is so strong, in fact, it comes highly recommended by investing legend Warren Buffett. In 2008, Buffett bet $1 million that an S&P 500-tracking fund could outperform a group of five actively managed hedge funds. He easily won that bet, with his fund earning total returns of nearly 126% over 10 years, while the hedge funds averaged returns of just 36% in that time.
How much could you earn?
There's no way to know for certain how any investment will fare, as past performance doesn't predict future returns. Historically, though, the S&P 500 itself has earned a compound annual growth rate of around 10%.
Let's say you can afford to invest $200 per month in the Vanguard S&P 500 ETF. If you continue earning a 10% average annual return on your investment, here's approximately how much you could accumulate over time:
| Number of Years | Total Portfolio Value |
|---|---|
| 20 | $137,000 |
| 25 | $236,000 |
| 30 | $395,000 |
| 35 | $650,000 |
| 40 | $1,062,000 |
Data source: Author's calculations via investor.gov.
With enough time and consistency, it's possible to build a portfolio worth $1 million or more. If you can afford to invest even a little more each month, you could earn exponentially more.
Nothing is guaranteed in the stock market, but the Vanguard S&P 500 ETF has a proven track record with plenty of long-term potential. The sooner you start investing, the more you could earn over time.
