$500 a Month in Vanguard's Total Stock Market ETF Since 2001 Grew to About $876,000

Say an investor bought $500 of the Vanguard Morningstar Total Stock Market ETF (NYSEMKT:VTI) on the first trading day of every month, starting Oct. 1, 2001, a few months after the fund launched. By the latest purchase on Sept. 1, the habit would've added up to 300 buys and $150,000 in contributions.

Using the fund's closing prices adjusted for dividends (this assumes every payout was reinvested and ignores taxes), the buys picked up about 2,323 shares. With shares trading near $377 as of this writing, the account would be worth about $876,000.

That's almost six times the cash put in. And it got there through two steep drawdowns: the 2008 financial crisis and the 2022 bear market.

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Mostly growth

Of that $876,000, just $150,000 (around 17%) came out of the investor's pocket. The other $726,000 or so is growth, for an annualized return of about 12% on the money invested, measured from each purchase date.

Showing how much of that growth came from time instead of the size of the checks, the first 10 years of purchases (October 2001 through September 2011) put in $60,000. These shares are worth around $584,000 now, or two-thirds of the whole account.

The past five years of purchases put in $30,000, and they're worth about $47,000. Not only did the early money get at least two decades to compound, but it also went in at much lower prices.

Of course, the fund itself mattered, too. It owns around 3,500 U.S. stocks, almost the entire investable market, and its annual expense ratio is 0.03%. That mix has growth stocks and value stocks of all sizes.

It isn't spread evenly, though. Its 10 largest holdings, led by the biggest tech firms, were around a third of its assets on June 30.

Its name changed on July 29, when Vanguard added "Morningstar" after Morningstar acquired CRSP, the company behind its benchmark index.

The 2008 crash bought the cheapest shares

From its closing high on Oct. 9, 2007, to its low on March 9, 2009, the fund lost around 55% of its value, including dividends.

The monthly buyer's account dropped from about $54,700 at the 2007 peak to about $29,500 at the March 2009 bottom, even while contributions rose to $45,000. After over seven years of saving, the account was worth around a third less than the money invested.

But the plan kept buying through it all. The 18 buys from October 2007 through March 2009 put in $9,000, and the shares are worth around $81,000 now -- about nine times their cost. I'd say that's the most helpful number here, because those were the months when stopping would have been easiest to justify.

Notably, the account was back above its 2007 peak by December 2009, helped by the new money coming in. The fund itself didn't close above its 2007 high, including dividends, until March 2012. Put another way, the monthly habit brought the investor back to even over two years before the fund did.

2022 stung more in dollars

The 2022 bear market was milder in percentage terms, as the fund lost around 25% from Jan. 3 to Oct. 12, 2022.

But the account was far bigger by then, so the dollar loss was, too. It shrank from around $502,000 to about $379,000, a paper loss of about $123,000 -- almost as much as the $126,500 contributed over the previous 21 years.

And at that size, a $500 buy was only about 0.1% of the balance. The 12 purchases made in 2022 put in $6,000, and they're worth around $11,600 today. At that point, nearly all of the account's movement came from the shares it already held.

Worth starting the habit today?

True, a new buyer can't get 2009's prices. The fund is less than 3% under the record close it set on Aug. 13, and another drawdown might happen at any time. The stocks in it also had a price-to-earnings ratio of around 27 as of June 30, according to Vanguard -- a pricey starting point.

But both drawdowns arguably show why a regular buy-and-hold routine helps. The buys made as the account was losing money ended up being some of its best, and they only happened because the plan kept going.

For anybody who wants to hold nearly the whole U.S. stock market for next to nothing, I think this fund is a reasonable place to start the same $500 habit today, even near a record high. I just wouldn't count on the next 25 years matching the past 25.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.