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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 (NYSEMKT: VOO) -- and the S&P 500 (SNPINDEX: ^GSPC) 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.
VOO data by YCharts.
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:
| 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.