Put $10,000 in the S&P 500 ETF and Wait 20 Years (2024)

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What If You Had Invested in Just the S&P 500?

People often use the S&P 500 as a yardstick for investing success. Active traders or stock-picking investors are often judged against this benchmark in hindsight to evaluate their savvy.

Let's take a historical example: Soon after Donald Trump entered the race for the Republican nomination for president, the press zeroed in on his net worth. Financial experts have pegged his net worth at $2.5 billion. One of the cornerstones of Trump's campaign was his success as a businessperson and his ability to create such wealth. However, financial experts pointed out that if Trump liquidated his real estate holdings, which were estimated to be worth $500 million, back in 1987, and invested them in the S&P500 Index, his net worth would be as much as $13 billion in 2015.

It is just one more example of how the S&P 500 Index continues to be held up as the standard by which all investment performances are measured. Investment managers are paid a lot of money to generate returns for their portfolios that beat the S&P500, yet on average, most don't.

This is the reason why an increasing number of investors are turning to index funds and ETFs that simply try to match the performance of this index. If Trump had done so back in 1987, he would have made 26 times his money for an average annualized return of 12.3% by the time he was inaugurated (from 1987 to 2015—the date of calculation for projected net worth). But hindsight is 20/20, and he could not have known that.

Using Hindsight to Predict Future Performance

Because past performance is no indication of future performance, no one can say whether the stock market will perform the same way in the next 20 years. However, you can use past performance to create some hypothetical scenarios that allow you to consider possible outcomes. To do that, look at the 20-year performance of the S&P 500 at various intervals as an indication of how it might perform under similar circ*mstances in the future.

One of the biggest reasons why it is impossible to predict stock market returns over a long period of time is because of the existence of black swans. Black swans are catastrophic, unexpected events that can alter the course of the markets in an instant and whose impact may be felt for years to come. Such events are called black swans because they appear so rarely, but they appear often enough that they have to be accounted for when looking into the future.

The terrorist attacks on Sept. 11, 2001, were a black swan event that impacted the economy and the markets for years. Other examples of black swan events are the global financial crisis of 2008 and the COVID-19 pandemic that erupted worldwide in March 2020.

You also have to consider the market cycles that can occur within a 20-year span. For example, in the 20-year span from 2001 to 2020, the S&P 500 had three distinct bull markets and three bear markets.

Research from Invesco shows that from the period of November 1968 through December 2020—a span of more than 50 years—the average length of a bull market was 1,764 days (or approximately 58 months), while the average bear market lasted 349 days (11.5 months). Over this period, the average gain in a bull market was +180.04%, while the average loss in a bear market was -36.34%.

A bull market is generally characterized by a market rise of at least 20% from its previous low. A bear market is defined by a market decline of at least 20% from its prior high.

Choosing a Hypothetical Scenario

The most recent 20-year span, from 2001 to 2021, not only included three bull markets and three bear markets, but it also experienced a number of major black swans with the tech wreck and terrorist attacks in 2001, the financial crisis in 2008, and the COVID-19 pandemic.

Despite these unprecedented events, the S&P 500 still managed to generate a total annual return of 8.06% with reinvested dividends. The total return over this period was 409.13%, which means that a $10,000 investment made at the beginning of 2001 would have been $50,913.05 by the end of 2021.

Taking a different 20-year span that also included three bull markets but only one bear market, the outcome is quite different. In the period from 1987 to 2006, the market suffered a steep crash in October 1987, followed by another severe crash in 2001 to 2002, but it still managed to return an average of 11.24% with dividends reinvested, which is an 8.10% inflation-adjusted return. The total return of $10,000 invested in January 1987 would have been $84,227.27. Likewise, the market roared back following the 2007-2008 financial crisis to the longest bull run on record.

You could repeat that exercise over and over to try to find a hypothetical scenario you expect to play out over the next 20 years, or you could simply apply the broader assumption of an average annual return since the stock market’s inception, which is 6.86% on an inflation-adjusted basis. With that, you could expect your $10,000 investment to grow to $34,000 in 20 years.

Why Is the S&P 500 a Good Long-Term Investment?

The S&P 500 is one of the most widely followed proxies for the U.S. stock market. It's a bellwether and benchmark for many major funds and portfolio managers. From 1950 to 2022, the S&P 500 yielded an annualized average return of 11.19%.

What Is an Inexpensive Way to Invest in the S&P 500?

A cost-effective way to invest in the S&P 500 is through an exchange-traded fund like the SPDR S&P 500 ETF Trust (SPY), which has an expense ratio of 0.0945%.

Is Investing in the S&P 500 Less Risky Than Buying a Single Stock?

Generally, yes. The S&P 500 is considered well-diversified by sector, which means it includes stocks in all major areas, including technology and consumer discretionary—meaning declines in some sectors may be offset by gains in other sectors.

The Bottom Line

You may not be able to predict the performance of the S&P 500 Index for the next 20 years, but you are not alone. In one of his annual letters to shareholders, Warren Buffett included an excerpt from his will that ordered his children’s inheritance to be placed in an S&P 500 Index fund because the “long-term results from this policy will be superior to those attained by most investors—whether pension funds, institutions, or individuals who employ high-fee managers.”

Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Before trading options, please readCharacteristics and Risks of Standardized Options. Supporting documentation for any claims, if applicable, will be furnished upon request.

There is an Options Regulatory Fee that applies to both option buy and sell transactions. The fee is subject to change. SeeFidelity.com/commissionsfor details.

Put $10,000 in the S&P 500 ETF and Wait 20 Years (2024)

FAQs

What is the average rate of return for the S&P 500 over 20 years? ›

Stock Market Average Yearly Return for the Last 20 Years

The historical average yearly return of the S&P 500 is 10.16% over the last 20 years, as of the end of May 2024. This assumes dividends are reinvested. Adjusted for inflation, the 20-year average stock market return (including dividends) is 7.41%.

What if I invested in SP 500 20 years ago? ›

Here's how much you would have now if you invested in the S&P 500 20 years ago, based on varying starting amounts: $1,000 would grow to $2,533. $5,000 would grow to $12,665. $10,000 would grow to $25,331.

What if I invested $1000 in S&P 500 10 years ago? ›

That means if you held each asset for 10 years, you'd be up 126.4% with VOO or 126.9% with SPY. So imagine you put $1,000 into either fund 10 years ago. You'd be up to roughly $3,282 with VOO or $3,302 from SPY.

How much would $10,000 invest in the S&P 500 in 2000? ›

Think About This: $10,000 invested in the S&P 500 at the beginning of 2000 would have grown to $32,527 over 20 years — an average return of 6.07% per year.

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 S&P 500 10 year return? ›

S&P 500 10 Year Return (I:SP50010Y)

S&P 500 10 Year Return is at 178.6%, compared to 174.4% last month and 177.1% last year. This is higher than the long term average of 115.0%.

How much will $1,000 invested be worth in 20 years? ›

The table below shows the present value (PV) of $1,000 in 20 years for interest rates from 2% to 30%. As you will see, the future value of $1,000 over 20 years can range from $1,485.95 to $190,049.64.

How to double 10k quickly? ›

  1. Flip Stuff For Money. One of the more entreprenurial ways to flip 10k into 20k is to buy and resell stuff for profit. ...
  2. Invest In Real Estate. ...
  3. Start An Online Business. ...
  4. Start A Side Hustle. ...
  5. Invest In Stocks & ETFs. ...
  6. Fixed-Income Investing. ...
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  8. Invest In Debt.
5 days ago

Is S&P 500 ETF a good long-term investment? ›

Why Is the S&P 500 a Good Long-Term Investment? The S&P 500 is one of the most widely followed proxies for the U.S. stock market. It's a bellwether and benchmark for many major funds and portfolio managers. From 1950 to 2023, the S&P 500 yielded an annualized average return of 11.34%.

Does the S&P 500 double every 10 years? ›

We saw in the previous section that investing in the S&P 500 has historically allowed investors to double their money about every six or seven years. Your initial $1,000 investment will grow to $2,000 by year 7, $4,000 by year 14, and $6,000 by year 18.

How much is $10,000 in Tesla 10 years ago? ›

If you invested $10,000 with founder Elon Musk 10 years ago, your stake would be worth $2.1 million now. That works out to a more than 70% average annual return. The same $10,000 put into the S&P 500 during that time grew just 274% to $37,376. That's just 14% compounded annually.

How much is $10,000 invested in the S&P 500 in 1980? ›

Craziest thing I learned recently: $10,000 invested in the S&P 500 in 1980 would be worth over $1M today.

How much do you need to invest in S&P 500 to become a millionaire? ›

Data source: Author's calculations. As you can see from the chart, investing $5,000 annually in the S&P 500 would make you a millionaire in a little over 30 years, assuming average 10.25% annual returns.

How much do I need to invest to make $1 million in 10 years? ›

In order to hit your goal of $1 million in 10 years, SmartAsset's savings calculator estimates that you would need to save around $7,900 per month. This is if you're just putting your money into a high-yield savings account with an average annual percentage yield (APY) of 1.10%.

Should you put all your savings in S&P 500? ›

Putting all your money into a single type of investment is risky. Spreading your money across different investments makes you less dependent on any one to do well. A good rule of thumb is not to invest more than 10% of your money in high-risk investments.

What is the S&P 500 over the last 20 years? ›

The S&P 500 returned 345% over the last two decades, compounding at 7.7% annually.

What is the average return of the S&P 500 over the last 15 years? ›

The S&P 500: 15-year return of 495% (12.6% annually) The S&P 500 tracks 500 large and profitable U.S. companies. The index is weighed by market capitalization, such that larger companies have more influence over its performance.

What is the average return of the S&P 500 over 60 years? ›

Stock market returns since 1960

This is a return on investment of 58,224.60%, or 10.39% per year. This lump-sum investment beats inflation during this period for an inflation-adjusted return of about 5,395.05% cumulatively, or 6.42% per year.

What is the average return on bonds last 20 years? ›

Based on yields over the past 20 years, you can expect average interest payments of between 3% and 4%.

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