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If You Invest $340 a Month in the Vanguard S&P 500 ETF, Here's What History Says It Could Be Worth in 22 Years
Key Points
The S&P 500 has delivered a 15% annualized return since VOO's inception in 2010.
Its historical return is closer to 10% over the past 100 years.
If you invested $340 a month into the Vanguard S&P 500 ETF (NYSEMKT:VOO) for 22 years, and it grew at its historical average return of 15% since its inception in 2010, you'd have nearly $606,200. Now, the caveat is that the S&P 500 -- the underlying index VOO tracks -- has been exceptionally strong during that period. Its historical average annual return has been closer to 10% over the past century. If it grew at that rate, you'd have roughly half the return in 22 years at around $306,975.
Here's a look at how much the future return of the Vanguard S&P 500 ETF can impact your investment over the long term.
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The return matters more than the monthly amount
If you invested $340 every single month for 22 years, your total cumulative contributions would be $89,760. At the S&P 500's historical average 10% annualized total return, your investment would grow by over $217,100 in 22 years, bringing the total to $306,860. However, if your investment returns at VOO's 15% historical annual average since its inception, it would gain another $300,000, bringing the total to over $606,000. That's a massive difference and shows the long-term impact of compounding returns.
There's no telling what VOO's returns will be over the next 22 years. The ETF simply tracks the S&P 500, which provides broad exposure to the largest U.S. companies. It weights its holdings toward the biggest companies by market cap. Its top ten holdings are currently leading tech or tech-adjacent consumer companies, most of which are investing heavily in AI. If the technology lives up to its immense promise, VOO could continue to deliver returns at or above its historical level. However, if AI fails to deliver, the S&P 500 (and therefore VOO) could return below the index's historical average.
Either way, an investment in VOO is a bet that the stock market will deliver returns at least matching its historical average over the long term.
Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.