An investor who placed $25,000 into an S&P 500 index fund in 1960 and reinvested all dividends would hold more than $20 million today without making another contribution, according to a recent analysis by The Motley Fool.
The result underscores the returns achievable through long-term, passive exposure to the S&P 500 index (SNPINDEX: ^GSPC). No active stock picking, market timing, or economic forecasting was involved; the only requirement was holding the position across decades of market cycles.
Index funds tracking the S&P 500 are distinguished by very low annual turnover, trading only when the underlying index rebalances. That structural feature translates into minimal fee drag. The Vanguard S&P 500 ETF (NYSEMKT: VOO), for instance, carries an expense ratio of just 0.03% annually and allows purchases as small as $1, enabling automatic incremental investments.
Alternative investment vehicles — including many actively managed ETFs and mutual funds — often come with higher fees and elevated tax liabilities from short-term trading. A broad-market index approach avoids both, relying on the historical upward trajectory of U.S. equities rather than tactical decisions.
Not every analyst recommends buying into the strategy at current levels. Motley Fool's Stock Advisor team recently identified what it considers its 10 best stocks to buy now, and the Vanguard S&P 500 ETF did not make the list. The analysts said the 10 selected stocks could produce larger returns in the coming years.
