Where Will the Vanguard S&P 500 ETF (VOO) Be in 20 Years? Here's What History Suggests.
Key Points
Over the past 100 years, the S&P 500 has generated an average annual return of roughly 10%.
If the index can achieve that over the next 20 years, investors would see their money grow by nearly six times.
The Vanguard S&P 500 ETF (VOO) is one of the cheapest and best ways to invest in the index.
Over the past 100 years, a simple buy-and-hold investment in the S&P 500 (SNPINDEX: ^GSPC) would have been one of the best ways to make money. During that time, the index averaged a roughly 10% annual return.
At that return, a $100 investment in the S&P 500 100 years ago would have turned into nearly $1.4 million.
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While returns can vary widely on a short-term basis, it's still reasonable to think that a 10% average annual return for index funds such as the Vanguard S&P 500 ETF (NYSEMKT: VOO) is possible over the next 20 years.
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If that were to happen without any additional contributions at all, a $10,000 investment would grow to roughly $67,275 or a total return of more than 570%.
The argument is pretty simple: for decades, the U.S. economy has been one of the world's greatest growth engines. It continues to innovate and expand. New companies emerge to replace those that don't evolve fast enough. It's been the constant catalyst that's kept the global economy moving for decades.
And investors have been prime beneficiaries. An investment in the Vanguard S&P 500 ETF hasn't required anybody to pick winners or even constantly manage their portfolios. The index evolves on its own because more successful companies grow larger and ultimately receive greater weightings in this market-cap-weighted index.
While future returns are by no means guaranteed, investing in the S&P 500 remains one of the best ways to create long-term wealth.
David Dierking 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.