There is no financial goal that fits perfectly for everyone. Everyone's personal financial goals should reflect their unique circumstances and aspirations. That said, the million dollar mark has long been recognized as a financial mark of “success,” especially when it comes to retirement savings.
So, what if you say you can achieve a million-dollar retirement by investing less than most of the latest monthly car payments in the US? Good news: You are lucky.
Vanguard S&P 500 ETF (voo -1.70%)) – and S&P 500 (^gspc -1.71%)) Overall, it shows that a $500 investment per month can be converted into a $1 million portfolio. All you need is time and consistency.
voo Data based on data YCHARTS.
How the Vanguard S&P 500 will lead you to billionaires' land
Since it was created in September 2010, the ETF has averaged an annual return rate of around 12.5%. Averaging these returns is likely to turn $500 a month into $1 million over 26 years, but it is overly optimistic to assume that ETFs average an impressive return of that length .
Assuming a more conservative 10% average (long-term S&P 500 average), a $500 monthly investment could exceed the $1 million mark in over 30 years.
Past results do not guarantee future performance, and there is virtually no way to predict how ETFs will function in the future. You can perform better than expected, shave those estimates a bit, or perform worse than the historical average to add time.
The key part is to recognize that consistent investment over time can complicate and do many heavy things for you. Over 31 years, an average annual revenue of 10% is an investment of $500 per month totaling up to $109 million, with only $186,000 being personally invested during that period.
Why is the Vanguard S&P 500 ETF a great investment option?
The ETF reflects the S&P 500, which tracks 500 US companies on the market. It's a triple: it's diversified (although it's been skewed into high-tech stocks these days), it includes a blue chip company, and it's low cost.
Here's how ETFs are divided into 11 major sectors of the US economy:
| sector | ETF percentage |
|---|---|
| information technology | 30.7% |
| Financial | 14.1% |
| Consumer discretion | 11.4% |
| health care | 10.5% |
| Communication Services | 10.0% |
| Industrialist | 8.3% |
| Consumer standard | 5.5% |
| Energy | 3.2% |
| Utilities | 2.3% |
| real estate | 2.1% |
| material | 1.9% |
Data Source: Vanguard. Percentage as of January 31, 2025.
ETFs are not as diverse as before. This is because the rapidly increasing technology evaluation has led to a leaning in the emphasis on market capitalization. Still, it can have representatives in all major sectors.
These sectors have many market leaders and blue chip companies. Exposure to blue chip companies is important when investing in the long term, as it provides stability and consistency. This does not mean that they do not experience periods or hiccups, but they showed that they can stand the test of time and bring long-term value.
Don't overlook how low fees are beneficial in ETFs
The third part of this ETF Trifecta is low cost. The ETF's expense ratio is 0.03%, or $0.30 per $1,000.
Generally, expenses rates are not the first thing someone sees when deciding whether to invest in an ETF, but slight differences can equal thousands of dollars over time.
As for perspective, let's assume that someone invests $500 a month and makes an average annual revenue of 10% over 30 years. Based on the various expenses ratios, the amounts they pay at the fee are as follows:
| Expense rate | Amount paid at the fee |
|---|---|
| 0.03% | $5,600 |
| 0.25% | $45,500 |
| 0.50% | $88,800 |
Table by the author. The numbers are rounded to the nearest 100.
Even costs ratios of less than half of 0.03% to 0.50% have cost over $83,000 or more in 30 years. That's not a bucket reduction – every dollar tends to count a little more, especially when you retire.
This ETF has all the tools that underpin the equity portfolios of most investors. Instead of trying to chase market time and profits, focus on consistent investments throughout the ups and downs and see how you can develop in the long run with your favor.
Stefon Walters has the role of the Vanguard S&P 500 ETF. Motley Fool has posted and recommended positions on the Vanguard S&P 500 ETF. Motley Fools have a disclosure policy.
