Investing $150 per Month in This S&P 500 ETF Could Grow Into $300,000 Over 30 Years. Here's the Math.
Key Points
The Vanguard S&P 500 ETF (VOO) has averaged nearly 13% annual returns since its September 2010 inception.
VOO offers investors diversification, blue-chip exposure, and a low-cost way to invest in the S&P 500.
Taking advantage of time and compound earnings is a great way for investors to build wealth.
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One thing that has stayed true with investing is that time is one of the greatest tools investors can use to their advantage. Strictly saving to hit the six-figure mark will take most people a long time, but with compound earnings, you can cut that time down immensely.
Let's take the Vanguard S&P 500 ETF (NYSEMKT: VOO) as an example. Investing $150 monthly in the exchange-traded fund could grow to $300,000 in 30 years -- and that's assuming it performs worse than its historical average. Let's take a look at the math.
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VOO's performance has been impressive over the years
VOO began trading in September 2010, and since then, here are its average annual returns for different periods.
| 3-Year Average Annual Returns | 5-Year Average Annual Returns | 10-Year Average Annual Returns | Average Annual Returns Since Inception |
|---|---|---|---|
| 19.6% | 11.4% | 13.6% | 12.8% |
Data source: YCharts.
If we assume -- with the emphasis being on "assume," because we can't predict how stocks will perform -- that VOO will continue to reach any of these averages over 30 years, here's how much $150 monthly would grow to.
| Average Annual Returns | Investment Total After 30 Years |
|---|---|
| 19.6% | $1.96 million |
| 11.4% | $386,800 |
| 13.6% | $593,600 |
| 12.8% | $507,500 |
Table by author. Investment values rounded down to the nearest hundred.
Realistically, expecting VOO to continue those averages over 30 years is overly optimistic. However, even at a 10% average annual return, your investment would grow to over $296,000 (not accounting for VOO's 0.03% expense ratio).
Why invest in VOO?
VOO mirrors the S&P 500, the stock market's most important index. It tracks the 500 largest U.S. companies on the market, giving investors exposure to some of the most influential and important companies in the U.S. economy. They don't move hand-in-hand, but they generally move in the same direction over time (up).
VOO is a low-cost way to invest in the S&P 500, and it checks three key boxes: diversification, access to blue chip stocks, and proven results (though past results don't guarantee future performance).
Because VOO is market-cap weighted, large companies make up a larger share of the ETF than smaller ones, making it more top-heavy than it has historically been. Still, it includes companies across all major U.S. sectors, providing investors with broad exposure and serving as a one-stop shop.
One investment gives you a stake in 505 large-cap stocks that include plenty of blue chip stocks and industry leaders that you can count on to be resilient and continue to grow over time. If you're planning to hold an investment for the long haul (which you should be), those are the characteristics you want in an ETF.
How much $150 per month ultimately returns over 30 years will depend on VOO's performance, but it's well-equipped to help build wealth over time. You can't go wrong investing in it.
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Stefon Walters has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
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