$100 might seem like pennies in the stock market, especially when many stocks cost hundreds or thousands of dollars per share. However, a $100 monthly investment in the Vanguard S&P 500 ETF (VOO 0.23%), a boring ETF pegged to the S&P 500, could easily grow to more than $20,500 over the next decade. Here's how that math works out.
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The S&P 500 has generated an average annual return of roughly 10% since its inception in 1957. Let's assume that trend continues over the next ten years, and you contribute $100 to VOO at the end of each month. By the end of the ten years, you'd have earned roughly $8,500 in unrealized gains from your underlying investment of $12,000. By comparison, the same contributions to a savings account with a 3% yield would only have grown to $13,950.
NYSEMKT: VOO
Key Data Points
VOO gives investors instant exposure to the entire S&P 500, which is rebalanced every quarter to include the most prominent U.S. companies. It also charges a low expense ratio of 0.03%, since it's passively managed and automatically tracks the index. Since roughly 90% of active fund managers can't consistently beat the S&P 500 over long periods, it's smarter to simply invest in the entire market instead of trying to beat it with individual stock picks.
