Many people think that in order to become millionaires, they need to build a complex portfolio full of carefully selected stocks. And while this may actually be a move to millionaire status, it is also possible to increase an enormous amount of wealth without doing too much work. If this seems like a good option for you, it’s worth looking at the ETF Vanguard S&P 500 (NYSEMKT: FLIGHT).
The advantage of investing in the S&P 500
THE S&P 500 Index it consists of the 500 largest publicly traded companies, so it is a great 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 tracks the S&P 500. (If you are not familiar with ETFs, it is an abbreviation for exchange-traded funds. These funds follow different market indices and allow you to assemble a stock bucket with a single investment. it really doesn’t get more convenient than that.)
Now, the bad news is that the fund’s goal is not to beat the S&P 500. The good news, however, is that the S&P 500 has performed strongly over time and therefore achieving it is a good benchmark. In fact, the Vanguard S&P 500 ETF has provided 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 a great investment option, but let’s be clear – you will need to persevere in it for a long time to become a millionaire.
But let’s say you put $ 10,000 in that ETF and leave your money alone for 35 years. If that 15% average annual return is maintained, you will end up with $ 1.33 million. Keep your $ 10,000 invested for 40 years and you will have almost $ 2.7 million.
Of course, not everyone has $ 10,000 on hand to sink in a single ETF. So, let’s say that instead of a lump sum investment, you buy shares over time. If you invest $ 100 a month over 35 years, you’ll end up with just over $ 1 million – again, assuming the fund delivers the same average annual return of 15% during that window.
An easy ticket to wealth
The Vanguard S&P 500 ETF is not the only S&P 500 ETF you can collect. But it is a good choice if you want to accumulate a lot of money without having to put a lot of thought or effort into it. Of course, choosing a select group of stocks from the S&P 500 can give you a significantly higher return over time than the ETF Vanguard S&P 500 will give you. But if you are happy with the idea of an annual return of 15% and do not want to spend a lot of time researching companies and updating your portfolio, then this is an investment that may end up serving you very well for many years to come.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even our own – helps all of us to think critically about investing and making decisions that help us become smarter, happier and wealthier.