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Do you really know how much your money can grow in the stock market? It might be more than you think. The S&P 500 index (SNPINDEX: ^GSPC) is what most people mean when they say "the stock market." It tracks the performance of 500 of the largest publicly traded companies in America.
During the past 98 years (since 1928), the average stock market return of the S&P 500 has been 9.98%. That rate of return means the money you invested grew by about 10% each year -- every year.
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In the past 10 to 15 years, the stock market has been even more lucrative. The Vanguard S&P 500 ETF (NYSEMKT: VOO) has delivered an average annual return of 14.94% over the past 16 years since its launch in September 2010.
There are no guarantees in the stock market. That same 98-year average return of about 10% per year might not keep going. VOO might not deliver 14.94% for the next year, five years, or 10 years. The stock market could crash. The S&P 500 could struggle.
But in the long run, the stock market tends to recover and do well. What if the economy keeps growing and the S&P 500 keeps delivering strong returns? Let's make a few estimates for how big a $5,000 investment in the Vanguard S&P 500 ETF could grow, based on a "base case" (the same 9.98% long-term average returns), "bull case" (optimistic, high annualized returns of 14.94%), and "bear case" (pessimistic, lower return -- let's say 7%).
Here's how $5,000 invested in VOO could grow for the next 20 years with each of these estimated possible rates of return:
Data source: Author's calculations, Investor.gov Compound Interest Calculator.
This shows how powerful it can be to take a long-term outlook on the stock market. Buy low-cost index funds like VOO. Let the stock market do what it does. Your money is likely to grow in the long run with the power of compound interest.
Before you buy stock in Vanguard S&P 500 ETF, consider this:
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Ben Gran 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.
If You Invest $5,000 in VOO Today, Here's What History Says It Could Be Worth in 20 Years was originally published by The Motley Fool
