Ask someone what wealth is, and you might get a number. For many, $1 million is that number. It certainly sticks in your mind. It’s a round number, often the top prize on your favorite game show. Besides, does being a thousandaire sound cool? No. And the goal of being a billionaire isn’t realistic for most people.
But a millionaire? Ah, it just sounds nice. It’s also far more obtainable than most people would let themselves believe. Accumulating a million bucks isn’t easy, but there are ways to do it that are surprisingly simple.
For example, here’s one virtually bullet-proof plan to do it: Invest $500 into this ETF each month, and… well, that’s it really, other than waiting.
It’s time to get started.
An ETF Warren Buffett puts Berkshire’s money behind
Famous investor Warren Buffett doesn’t need to invest in index funds. He’ll go down as one of humankind’s greatest stock pickers. But even he has put money into the Vanguard S&P 500 ETF(NYSEMKT: VOO) via his holding company, Berkshire Hathaway. Alongside 49 or so stocks, it’s one of only two ETFs in Berkshire’s equity portfolio.
The Vanguard S&P 500 is an exchange-traded fund (ETF). It’s made of 505 stocks, and is built to replicate the returns of the S&P 500, an index of America’s most prominent companies, and a widely recognized benchmark and proxy for the U.S. stock market. Investing in the S&P 500 is like a bet on the American economy.
What’s great about the Vanguard S&P 500 is that it gives investors instant diversification and costs very little to hold. All funds charge fees that go to the fund’s managers — a percentage of the amount each investor has in the fund. The sum of those fees is the fund’s expense ratio, and for the Vanguard S&P 500 ETF, that’s just 0.03%, or $3 a year for every $10,000 your investment is worth.
Making a million bucks with Vanguard’s S&P 500 ETF
Investment returns are a numbers game, but the S&P 500’s long-term track record is why it stands out as an obvious choice. As you may have noticed in the past few years, the stock market can be volatile in the short term. But over time frames measured in decades, the S&P 500 has been a fairly consistent compounder. It returned an average of 9.4% annually from 1972 to 2021.
Thanks to its dividend-paying components, the Vanguard S&P 500 also pays a dividend that yields 1.4%. But, for simplicity and to be a little conservative, let’s assume that its total returns will average about 10% annually from here.
If you invested $500 monthly into Vanguard’s S&P 500 ETF, your portfolio growth would look something like this over the years.
Years of Investing
Portfolio Value
5
$38,281
10
$99,932
15
$199,222
20
$359,130
25
$616,662
30
$1,031,422
Chart by author.
What’s the lesson here?
Look closely at the chart above. Do you see how it took 15 years to accumulate the first $200,000, but that amount more than quintupled over the next 15 years? That’s how compound growth works. The sooner you get started, the more time you have for that small money snowball to become a giant asset boulder thundering down the side of the mountain.
People often get busy in the grand scheme of life. You work hard for an education or to build a career. You want to get married, have children, buy a house and new cars, and treat yourself along the way. I get it. For many people, $500 will be a lot of money to cough up monthly. But the longer you put off starting to invest, the more work you’ll have to put in later to reach the same goals.
So, whether you’re retirement planning or building wealth in general, getting started as quickly as possible is the easiest path to your financial goals. This is the recipe right here. Investing doesn’t have to be complicated; you just have to get started.
Should you invest $1,000 in Vanguard S&P 500 ETF right now?
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Justin Pope 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.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
