Many people think that in order to become a millionaire, they need to build a complex portfolio of carefully selected stocks. And while it may in fact be one ticket to millionaire status, it is also possible to increase a tremendous amount of wealth without doing much work. If this sounds like a good option to you, it’s worth it. Vanguard S&P 500 ETF (NYSEMKT: VOO).
The benefit of investing in the S&P 500
The S&P 500 Index consists of the 500 largest listed companies, and is therefore an excellent representation of the broad market. When you invest in the S&P 500, you not only add quality stocks to your portfolio, you also get instant diversification.
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The Vanguard S&P 500 ETF follows the S&P 500. (If you are not familiar with ETFs, it is short for exchange traded funds. These funds follow different market indices and let you build up a bucket of stocks with a single investment. It really does not matter more convenient than that.)
The bad news, however, is that the fund does not want the goal of defeating the S&P 500. The good news, however, is that the S&P 500 has performed well over time, so it’s a good benchmark to pursue. In fact, the Vanguard S&P 500 ETF has been delivering an average annual return of 15% since its inception.
How a single ETF can make you a millionaire
The Vanguard S&P 500 ETF is an excellent choice as an investment, but let’s be clear: you’ll have a long way to go to make yourself a millionaire.
But let’s assume you put $ 10,000 in the ETF and leave your money alone for 35 years. If the average annual return is 15%, you will end up with $ 1.33 million. Keep investing $ 10,000 for 40 years, and you will see almost $ 2.7 million.
Of course, not everyone has $ 10,000 on hand to sink into a single ETF. So let’s say, instead of a lump sum, you buy shares over time. If you have been investing $ 100 a month for more than 35 years, you will have just over $ 1 million – again, assuming the fund returns the same average annual return of 15% over the period.
An easy ticket to wealth
The Vanguard S&P 500 ETF is not the only S&P 500 ETF you can pick up. But it is a good choice if you want to build up a lot of money without thinking about it. If you select a certain group of S&P 500 stocks by hand, you can of course deliver a significantly higher return than the Vanguard S&P 500 ETF will give you. But if you are happy with the idea of an annual return of 15% and you do not want to spend a lot of time researching companies and updating your portfolio, then this is an investment that you can do very well for many years to come. serve. to come.
This article represents the opinion of the author, who may not be in agreement with the ‘official’ recommendation position of a Motley Fool premium advisory service. We are furry! Questioning an investment thesis – even one of our own – helps us all to think critically about investments and to make decisions that help us become smarter, happier and richer.