Could This Easy Buffett-Approved Investment Turn $300 Per Month into $1 Million?

Warren Buffett's investing techniques have resulted in big gains for Berkshire Hathaway over the long term and a billion-dollar portfolio. So you may be wondering this: Could one very easy Buffett-approved investment turn $300 per month into $1 million? The answer is yes, if you follow certain key steps.

This particular investment is an S&P 500 index fund, such as the Vanguard S&P 500 ETF (NYSEMKT: VOO). When you buy shares of this fund, you're betting on the long-term growth of American companies, something Buffett has done throughout his investing career through individual stocks and exchange-traded funds, including this Vanguard one. This has helped Berkshire Hathaway post a compounded annual gain of nearly 20% over the past 59 years.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Now it's our turn. Let's find out how you can start with $300 and potentially end up with $1 million.

Image source: The Motley Fool.

Why Buffett recommends this investment

First, let's consider why Buffett recommends such an instrument in the first place. The top investor strongly believes in stock picking, but he also emphasizes that investing in a fund that tracks the S&P 500 is the perfect way for nonprofessional investors to gain exposure to America's best companies. You don't have to worry about picking tomorrow's winning stocks -- and this investment also automatically offers you instant diversification across stocks and industries.

It's important to remember that the S&P 500 includes the companies driving the economy of the times -- and the index rebalances quarterly, meaning when you invest in this benchmark, you'll always be invested in the most compelling stocks of the day. Over time, the S&P 500 has delivered an average annual return of 10%, so it's clearly rewarded long-term investors.

Of course, you won't directly buy shares of the index but instead shares of an ETF that tracks the index's performance. The Vanguard S&P 500 ETF holds the same stocks that are in the benchmark and at the same weight, so it can do this job.

Buffett not only recommends this sort of fund to others, but as mentioned above, he's been an investor in S&P 500 ETFs. To further illustrate his commitment to this strategy, he says he's directed a trustee, upon his death, to put most of his cash into such a fund for the benefit of his wife.

Turning a small investment into $1 million

Now, let's consider how you can turn a regular investment of a few hundred dollars into major wealth. It involves the following steps:

• Commit to an investing time period, ideally a long one such as 35 years.
• Make an initial investment in the Vanguard S&P 500 ETF.
• Decide on an amount to add on a monthly basis to this investment and stick to it over your time horizon.
• Watch your investment grow over the long run, thanks to the magic of compounding.

Let's consider a concrete example, using a time period of 35 years and the idea that the index will continue delivering an average annual return of 10%. If you make an initial investment of $1,000 in the Vanguard ETF and go on to invest $300 monthly, the value of your investment could reach $1 million by the end of that time period. You will have invested $127,000 -- and your returns would top $876,000.

If you don't want to set a such a lengthy time horizon or have a smaller amount to invest per month, don't worry. You can adapt this method to your budget and/or invest over a shorter time period, for example 15 to 20 years, and still see significant gains.

So as Buffett has said, an investment in a good index fund offers you a quick and easy way to gain exposure to quality companies that may win over the long run. And by applying the compounding strategy I mention above, you'll truly optimize your investment and may set yourself off on the road to $1 million.

Should you invest $1,000 in Vanguard S&P 500 ETF right now?

Before you buy stock in Vanguard S&P 500 ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard S&P 500 ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $658,297!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $883,386!*

Now, it’s worth noting Stock Advisor’s total average return is 992% — a market-crushing outperformance compared to 172% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 9, 2025

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.