No financial goal fits everyone perfectly. 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 regarding retirement savings.
Well, what if I told you a million-dollar retirement could be achievable by investing less than most modern monthly car payments in the U.S.? Good news: You’re in luck, because it can.
The Vanguard S&P 500 ETF (VOO -1.70%) — and the S&P 500 (^GSPC -1.71%) as a whole — have shown that they have the ability to turn $500 monthly investments into a million-dollar portfolio. All you need is time and consistency.
How the Vanguard S&P 500 could lead you to millionaire land
Since this ETF was created in September 2010, it has averaged around 12.5% annual returns. Averaging those returns could turn $500 monthly investments into $1 million in just over 26 years, but it would be overly optimistic to assume the ETF will average those impressive returns for that length of time.
Assuming a more conservative 10% average (around the long-term S&P 500 average), $500 monthly investments could cross the million-dollar mark in just over 30 years.
Past results don’t guarantee future performance, and there’s virtually no way to predict how the ETF will perform in the future. It could perform better than expected and shave some time off those estimates, or it could perform worse than its historical average and add time.
The important part is realizing how consistent investments over time can compound and do a lot of the heavy lifting for you. In 31 years, $500 monthly investments that average 10% annual returns would total up to over $1.09 million, with only $186,000 personally invested in that span.
Why is the Vanguard S&P 500 ETF a great investment option?
This ETF mirrors the S&P 500, which tracks the 500 largest U.S. companies on the market. It’s a trifecta: It’s diversified (although it has been skewed toward tech stocks lately), it contains blue chip companies, and it’s low-cost.
Here’s how the ETF is divided among the 11 major sectors of the U.S. economy:Â
| Sector | Percentage of the ETF |
|---|---|
| Information technology | 30.7% |
| Financials | 14.1% |
| Consumer discretionary | 11.4% |
| Health care | 10.5% |
| Communication services | 10.0% |
| Industrials | 8.3% |
| Consumer staples | 5.5% |
| Energy | 3.2% |
| Utilities | 2.3% |
| Real estate | 2.1% |
| Materials | 1.9% |
Data source: Vanguard. Percentages as of Jan. 31, 2025.
The ETF isn’t as diverse as it used to be because skyrocketing tech valuations have tilted the market cap-weighted fund. Still, it manages to have representation in all major sectors.
Within those sectors are many market leaders and blue chip companies. Exposure to blue chip companies is important when investing for the long term because they offer stability and consistency. This doesn’t mean they don’t experience down periods or hiccups, but they’ve stood the test of time and have shown they can deliver long-term value.
Don’t overlook how beneficial low fees can be with an ETF
The third part of this ETF’s trifecta is its low cost. The ETF’s expense ratio is 0.03%, or $0.30 per $1,000 invested.
The expense ratio isn’t generally the first thing someone looks at when deciding whether to invest in an ETF, but slight differences can equal thousands of dollars over time.
For perspective, let’s assume someone invests $500 monthly and averages 10% annual returns over 30 years. Based on different expense ratios, here’s how much they would pay in fees.
| Expense Ratio | Amount Paid in Fees |
|---|---|
| 0.03% | $5,600 |
| 0.25% | $45,500 |
| 0.50% | $88,800 |
Table by author. Numbers rounded down to the nearest hundred.
Even an expense ratio increase of less than half a percentage, from 0.03% to 0.50%, equaled over $83,000 more paid in fees over 30 years. That’s no drop in the bucket — especially in retirement, when every dollar tends to count a bit more.
This ETF has all the tools to be the foundation of most investors’ stock portfolios. Instead of trying to time the market and chasing gains, focus on consistent investments through the ups and downs and watch how it can play out in your favor in the long run.
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.