If you have $500, you can invest it all in one stock. But a better option is to buy an exchange-traded fund (ETF), which allows you to invest your money in hundreds or even thousands of stocks in one purchase.
of Vanguard S&P 500 ETF (VOO 0.87%) is one of the most reliable investments on the planet and has very low fees. Learn how investing $500 in this top S&P 500 index fund can skyrocket your net worth.
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What is the Vanguard S&P 500 ETF?
The Vanguard S&P 500 ETF (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 United States. The top five holdings of the fund are as follows:
1.Microsoft (MSFT -0.05%)
2. Apple (AAPL 2.12%)
3. Nvidia (NVDA -2.50%)
4. Amazon.com (AMZN 0.86%)
5. Metaplatform Class A stock (meta -0.41%)
The goal of this fund, or any index tracking fund, is to replicate the underlying index as closely as possible. Therefore, if the S&P 500 Index achieves a 20% return, you can expect VOO to provide approximately the same return, net of fees. However, VOO's ETF expense ratio is extremely low at 0.03%, with only $3 of every $1,000 invested going toward fees, so the fund's return is roughly equivalent to that of the S&P 500 index.
How to grow $500 to $1 million
If you start investing $500 and can budget an additional $500 each month, your investment could grow to $1 million in about 30 years. Historically, the S&P 500's average annual return has been about 10%.
Some years the returns are significantly higher, while other years the index returns are negative. However, even after long periods of decline, the S&P 500 Index has an impressive track record of recovery.
Shows how a $500 monthly investment will grow over time, assuming an average annual rate of return of 10%.
| time | Increase your investment by $500 per month |
|---|---|
| After five years | $39,391 |
| 10 years later | $102,025 |
| 20years later | $365,367 |
| 30 years later | $1,048,371 |
Data source: Author.
Investing in VOO won't make you a millionaire overnight. However, if you invest consistently over a long period of time, the power of compound interest allows you to reap market returns and your money to create great wealth.
Even in the midst of a bear market, it's important to stick to your guns, even when you're tempted to pause your investments, or worse, liquidate them. Most investors do best with dollar-cost averaging, a strategy that involves investing a set amount of money on time, regardless of whether the market is rising or falling. His investing $500 in VOO at the beginning of each month is an example of dollar-cost averaging.
If you want to significantly boost your returns on Vanguard's S&P 500 ETF, consider opening a Roth IRA and buying stocks. You won't get any upfront tax relief, but if you follow the rules, all withdrawals in retirement will be tax-free. Given the power of these compounding returns, investing in her VOO through a Roth IRA could potentially generate significant tax-free wealth in the future.
Randi Zuckerberg is a former Facebook head of market development and spokesperson, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool's board of directors. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool's board of directors. Robin Hartil has no position in any stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Vanguard S&P 500 ETFs. The Motley Fool recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
