ETFs
Is the Vanguard S&P 500 ETF a millionaire maker?
This popular investment vehicle has an excellent track record that investors cannot ignore.
You might think that the only way to generate good returns on your investments is to try to successfully select individual stocks that can become very profitable over time. But investors might be surprised to learn that it is possible to achieve good returns simply by buying and holding an exchange-traded fund (ETF).
For example, something like the Vanguard S&P 500 Exchange Traded Fund (VOO 0.10%) has always been a great choice for patient, long-term investors. But looking ahead, can this popular ETF turn you into a millionaire?
Hard to beat
As its name suggests, the Vanguard S&P 500 ETF tracks the performance of the overall S&P 500which consists of the 500 largest and most profitable companies based in the United States. It includes companies of all sizes, ranging from $3.4 trillion Microsoft to $15.9 billion News CorpInvestors benefit from exposure to the growth and innovation happening in this country. Historically, this has proven to be a winning bet.
Since its launch in September 2010, the Vanguard S&P 500 ETF has generated a total return, including dividends, of 548%. That translates to an exceptional annualized gain of about 14.3%. This performance undoubtedly outperforms most others. active fund managers there, even if it costs a lot less. expense ratio is just 0.03%, which means you keep more of your money over time.
If you had invested $155,000 in the Vanguard S&P 500 ETF at its inception, you would have $1 million today. That’s a fantastic result for a passive investment vehicle.
Of course, it helped that the ETF was launched in the wake of the Great Recession. And for most of the last 14 years, the stock market has enjoyed a strong rally thanks to ultra-low interest rates and an accommodative Federal Reserve.
Keep the right mindset
It’s hard to know what the Vanguard S&P 500 ETF’s returns will look like in the future. Many factors could affect the fund’s performance in the years ahead. Inflation could stay high for longer than expected, keeping interest rates high for longer. That could hurt the potential of stocks.
You may be wondering if now is a good time to invest, especially with the S&P 500 at record highs. We all want to be able to time the market correctly, buying low and selling high. But it’s impossible to do this accurately and consistently. In fact, you may be doing more harm to your portfolio by doing so.
It’s important to remember that time in the market is what matters most. Over long periods of time, the stock market goes up. It rewards patient investors who can ride out the short-term ups and downs and focus on the next two decades, rather than the next two quarters. That means investing early and investing often.
One way to seriously increase your returns is to adopt a strategy known as Dollar Cost AveragingInstead of investing a single initial amount, you can add savings to your portfolio regularly, such as monthly or quarterly. Based on the S&P 500’s historical average annual return of 10%, if you invest $10,000 today in the Vanguard S&P 500 ETF, while buying an additional $100 each month, you’ll be a millionaire in 40 years.
But regardless of the annualized returns the Vanguard S&P 500 ETF is able to produce in the future, investors who can invest more and have a longer investment horizon can significantly increase their chances of becoming millionaires. It’s that simple.
Neil Patel and its clients have no position in any of the stocks mentioned. The Motley Fool has a position in and recommends Microsoft and Vanguard S&P 500 ETF. The Motley Fool recommends the following options: long January 2026 $395 call on Microsoft and short January 2026 $405 call on Microsoft. The Motley Fool has a position in Microsoft and Vanguard S&P 500 ETF and recommends the following options: long January 2026 $395 call on Microsoft and short January 2026 $405 call on Microsoft. disclosure policy.