Key Points
If you’re looking to invest $100 a month into a low-fee index fund, how much can you expect to earn? It’s a good question. You’ll see recommendations to invest in a low-fee S&P 500 index fund all over the place, but you won’t often see any estimates of how much you might earn investing in it. So let’s take a look.
A look at the Vanguard S&P 500 ETF‘s (NYSEMKT: VOO) past performance offers a clue:
Period
Average Annual Gain
The past three years
22.2%
The past five years
12.9%
Past 10 years
15.4%
Part 15 years
15.4%
You might thus expect around a 15% annual return on average from this exchange-traded fund (ETF). But don’t think that — because for one thing, past performance is no guarantee of future returns. And the past 10-plus years have featured above-average gains from the stock market. It’s important to understand that the S&P 500 has averaged annual returns close to 10% (ignoring inflation) over many decades.
Here, though, are some examples of how $100 per month might grow in this ETF:
Period
Growing at 8% Annually
Growing at 10% Annually
Growing at 12% Annually
Five years
$7,039
$7,326
$7,623
10 years
$17,384
$19,125
$21,059
15 years
$32,582
$38,127
$44,736
20 years
$54,914
$68,730
$86,463
25 years
$87,727
$118,017
$160,000
30 years
$135,940
$197,393
$289,599
35 years
$206,780
$325,229
$517,100
40 years
$310,868
$531,111
$920,510
The truth is that no one can know how much you’ll earn over time in the S&P 500 — though we do know that you’ll participate in the growth of the U.S. economy and your gains will roughly track those of the overall stock market. (The S&P 500 accounts for about 80% of the U.S. stock market’s value.)
So do consider parking some of your long-term dollars in the S&P 500 via a solid index fund.
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Selena Maranjian 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.
