Key insights
- The article suggests investing $400 monthly in the Vanguard Growth Index Fund ETF (VUG) to potentially reach $1.5 million, citing the historical 10% average return of the S&P 500. It highlights the power of compounding and VUG's focus on growth stocks like Nvidia and Tesla. While not a guarantee, consistent investment in growth-oriented ETFs could positively influence long-term equity market returns for individual investors.
Investing in the stock market can seem intimidating if you don't have a lot of money saved up. But you can make up for that by making regular, periodic investments. If you're able to save and invest $400 per month, then you can still put yourself on track to grow your portfolio to more than $1.5 million in the future.
Below, I'll show you how that kind of growth is possible, without having to take on any significant risks.
If you invest money into the stock market each month, that can be an effective way to build up your retirement savings, even if you're starting with $0. The S&P 500 index, which includes the top stocks on U.S. markets, has averaged a return of 10% per year for decades.
The table below shows how your portfolio might grow over the long term, assuming you invest $400 each month in the stock market, and you average a 10% gain each year.
Through the power of compounding, the larger your balance gets, the more significant the growth becomes. That's why the big payoff comes with building up a big balance. But as you can see from the table, you can generate that through monthly investments, rather than having to start with a big lump sum today.
The S&P 500 has risen by 10% per year, but that's on average. And there's no guarantee that it will average that in the future. However, you can increase the odds of generating a strong return by investing in an exchange-traded fund (ETF) that focuses on growth, such as the Vanguard Growth Index Fund ETF (VUG 1.16%).
This Vanguard fund has a low expense ratio of 0.03%, and it invests in the country's top growth stocks. With 151 holdings, it gives you some terrific exposure to many top companies, including Nvidia, Tesla, and Eli Lilly, along with other big names. By targeting growth stocks, which typically outperform value and dividend stocks, you can increase the chances that you'll attain a strong return in the future, perhaps even outperform the S&P 500.
By investing regularly in a well-balanced ETF such as the Vanguard Growth Index Fund, you can put yourself on track to generating some fantastic returns in the future, and potentially ending up with a portfolio that's worth well over $1.5 million. While it will take time and require continuous monthly investments, the effort could be well worth it in the long run.