Why this ETF is all you need to grow rich.
If you've got $500, you could invest it all in a single stock. But a better move is to buy an exchange-traded fund (ETF) that lets you invest your money across hundreds, or even thousands, of stocks -- all in just one purchase.
The Vanguard S&P 500 ETF (VOO 0.68%) is one of the most reliable investments on the planet, and it has dirt cheap fees. Read on to learn how a $500 investment in this top S&P 500 index fund could send your net worth skyrocketing.
Image source: Getty Images.
What is the Vanguard S&P 500 ETF?
The Vanguard S&P 500 ETF, or VOO, is a fund that tracks the S&P 500 index, a collection of 500 of the largest and most profitable publicly traded companies in the U.S. The fund's top five holdings are as follows:
1. Microsoft(MSFT 0.74%)
2. Apple(AAPL 1.66%)
3. Nvidia(NVDA 2.57%)
4. Amazon.com(AMZN -0.17%)
5. Meta Platforms Class "A" shares (META 2.67%)
With this fund, or any index-tracking fund for that matter, the goal is to replicate the underlying index as closely as possible. So if the S&P 500 index notched returns of 20%, you'd expect the VOO to deliver about the same returns, minus fees. But since the VOO's ETF expense ratio is an ultra-low 0.03%, meaning just $3 of a $1,000 investment goes toward fees, the fund's returns are almost identical to those of the S&P 500 index.
How to grow $500 into $1 million
If you starting investment is $500 and you can budget an additional $500 each month, your investment could grow to $1 million after about 30 years. Historically, the S&P 500's average annual returns are around 10%.
Returns are significantly higher in some years, while the index has negative returns in some year. But even after prolonged downturns, the S&P 500 index has an incredible track record of bouncing back.
Here's how a $500 monthly investment could grow over time, assuming 10% average annual returns.
| Time | Growth of $500 Monthly Investment |
|---|
| After 5 years | $39,391 |
| After 10 years | $102,025 |
| After 20 years | $365,367 |
| After 30 years | $1,048,371 |
Data source: author.
Investing in the VOO isn't going to make you a millionaire overnight. But if you consistently invest over a long period, earning market returns allows your money to compound into serious wealth thanks to the power of compounding.
It's essential to stay the course even during a bear market, when you may be tempted to put your investments on pause -- or worse yet, cash out. Most investors fare best when they practice dollar-cost averaging, a strategy where you invest a set amount on schedule, regardless of whether the market is up or down. Investing $500 in the VOO at the beginning of each month is an example of dollar-cost averaging.
If you want to supercharge your returns on Vanguard's S&P 500 ETF, consider opening a Roth IRA to buy your shares. You won't get an upfront tax break, but if you follow the rules, all withdrawals will be tax-free in retirement. Given the power of those compound earnings, investing in the VOO through your Roth IRA could lead to substantial tax-free wealth in the future.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Robin Hartill has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
FAQs
A subscription with Motley Fool Stock Advisor generally costs $99 a year but can vary with promotional offers and the kind of subscription plan chosen. Motley Fool Stock Advisor can be worth it for investors who value the potential returns and stock picks as comprehensive investment guidance.
Can you make money in the stock market with $500? ›
Time allows your money to grow and bounce back from short-term market fluctuations. The potential payoff: $500 invested at a 10% return for 30 years could grow to around $10,000 before inflation, 20 times your initial investment.
Does the Motley Fool have an ETF? ›
Motley Fool Small-Cap Growth ETF
Provides exposure to high-quality U.S. small-cap companies that we believe are under the radar or underappreciated.
Are Motley Fool portfolios worth it? ›
For stock investors, Motley Fool services are likely worth the costs given their extensive research and successful past picks. But index investors or traders may find limited benefit relative to fees.
What is the rule of 72 Motley Fool? ›
Let's say that you start with the time frame in mind, hoping an investment will double in value over the next 10 years. Applying the Rule of 72, you simply divide 72 by 10. This says the investment will need to go up 7.2% annually to double in 10 years. You could also start with your expected rate of return in mind.
How much money do I need to invest to make $1000 a month? ›
A stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income, Mircea Iosif wrote on Medium. “For example, at a 4% dividend yield, you would need a portfolio worth $300,000.
What is the best ETF to buy right now? ›
- Top 7 ETFs to buy now.
- Vanguard 500 ETF.
- Invesco QQQ Trust.
- Vanguard Growth ETF.
- iShares Core SP Small-Cap ETF.
- iShares Core Dividend Growth ETF.
- Vanguard Total Stock Market ETF.
- iShares Core MSCI Total International Stock ETF.
If the S&P 500 outperforms its historical average and generates, say, a 12% annual return, you would reach $1 million in 26 years by investing $500 a month.
What is the hottest stock to buy right now? ›
Sign up for Kiplinger's Free E-Newsletters
| Company (ticker) | Analysts' consensus recommendation score | Analysts' consensus recommendation |
|---|
| Amazon.com (AMZN) | 1.29 | Strong Buy |
| Nvidia (NVDA) | 1.33 | Strong Buy |
| Microsoft (MSFT) | 1.33 | Strong Buy |
| Bio-Techne (TECH) | 1.39 | Strong Buy |
21 more rowsThe low investment threshold for most ETFs makes it easy for a beginner to implement a basic asset allocation strategy that matches their investment time horizon and risk tolerance. For example, young investors might be 100% invested in equity ETFs when they are in their 20s.
Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification.
Do I own the stock in an ETF? ›
ETFs do not involve actual ownership of securities. Mutual funds own the securities in their basket. Stocks involve physical ownership of the security. ETFs diversify risk by creating a portfolio that can span multiple asset classes, sectors, industries, and security instruments.
Can Motley Fool be trusted? ›
Since 1993, The Motley Fool has been a trusted source of investment and financial advice to millions of members. Read their reviews showcasing our commitment to making the world smarter, happier, and richer. We are dedicated to customer feedback in order to provide the best services possible.
Has Motley Fool really beaten the market? ›
The service claims to have beaten the S&P 500 by a factor of three over the last 20 years. The Motley Fool Stock Advisor service costs $99 for the first year ($199 per year after the first year). 12 The Stock Advisor service is well-respected in the investment community.
What are Motley Fool's 10 best stocks? ›
See the 10 stocks
The Motley Fool has positions in and recommends Alphabet, Amazon, Chewy, Fiverr International, Fortinet, Nvidia, PayPal, Salesforce, and Uber Technologies. The Motley Fool recommends the following options: short March 2024 $67.50 calls on PayPal.
Is Motley Fool's market Pass worth it? ›
At $89 for the first year, with a 30 day membership-fee back guarantee, and based on both their recent and historical performance, Motley Fool Stock Advisor is absolutely worth it. You should absolutely get the Motley Fool's next 24 stock recommendations, plus access to all their recent picks, and try it out.
How much money do I need to invest to make $3,000 a month? ›
Imagine you wish to amass $3000 monthly from your investments, amounting to $36,000 annually. If you park your funds in a savings account offering a 2% annual interest rate, you'd need to inject roughly $1.8 million into the account.
What is the expense ratio for Motley Fool? ›
Our passive ETFs (TMFC, TMFX, TMFE) have a gross annual expense ratio of 0.50%. For example, for every $1,000 you invest, you only pay $5 in fees. Our active ETFs (TMFG, TMFS, TMFM) have a gross annual expense ratio of 0.85%. For example, for every $1,000 you invest, you only pay $8.50 in fees.
Does Motley Fool recommend when to sell? ›
The Motley Fool sells stock regularly, too
We regularly give "sell" recommendations to our members and often for one of the reasons described above. There can be several valid reasons to sell a stock, and many long-term-focused investors frequently have reasons to offload parts of their holdings.
