It is possible to earn 45,000 euros by paying 100 euros every month into this simple ETF.
A single, simple, ETF, is still the easiest way to invest by focusing on the future growth of the largest American stock index. A small and constant investment, assuming you pay the equivalent of 100 euros each month, would allow you to earn up to 45,000 euros.
There is a reason (or perhaps more than one) why Warren Buffett, one of the most famous (and profitable) investors of all time, gave his wife these instructions for managing his inheritance once he died: invest 90% of the capital in an S&P 500 index fund and the remaining 10% in short-term government bonds.
One of the most popular tools to achieve this purpose is the Vanguard S&P 500 ETF. John Bogle, who was the founder and CEO of The Vanguard Group, also shared a similar view as Buffett: since most fund managers fail to consistently beat the S&P 500 index, you might as well simply invest in a fund that passively replicates the reference index, on which, moreover, the commissions are much lower than those expected on actively managed funds.
Today, it is operationally easy to invest in the S&P 500 through exchange-traded funds (ETFs), which are actively traded throughout the day.
Vanguard S&P 500 ETF to turn €100 per month into €45,000
But how can one of the world’s most popular ETFs - the Vanguard S&P 500 ETF - easily turn monthly investments of €100 into over €40,000?
Vanguard’s S&P 500 ETF was launched in 2010 and invests passively in the S&P 500 Index, with an expense ratio of 0.03% and a minimum investment of just $1.
If you had invested 100 euros every month in the ETF since its inception, today (165 months later) you would have an invested capital of 16,500 euros. Including reinvested dividends, the total value of the investment would now be 45,943 euros, for a gain of 178%, with dividends amounting to approximately 600 euros per year.
Consider the fact that the S&P 500 has averaged annual growth of about 10% since 1957. Assuming it grows at a similar pace over the next few years, the Vanguard S&P 500 ETF could generate gains comparable to those just shown over the next twenty years.
By investing 100 euros every month in the S&P 500, investors can cushion short-term volatility, buying more ETF shares when the market is falling and less when the market is recovering.
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Are ETFs a good idea?
This is an approach that we could define as "convenient" for those investors who do not have time to follow the markets, but there are also disadvantages to consider.
Since its launch, the ETF has actually risen 393%, generating a total return of 539% including reinvested dividends. If I had instead made a one-off investment of 16,500 euros in the same ETF, this would be worth around 105,500 euros today, with annual dividends of 1,370 euros.
Investing only a larger lump sum right away generates higher returns because you purchase shares at a lower price than having to pay a higher average price over the years. For this reason, in the case of small constant investments, it is reasonable to say that attempting to increase invested capital when prices are lower can lead to increasing returns in the long term.
Investing 100 euros every month in this ETF is a simple way to invest with some risk. However, it may not be the best choice for an investor who wants to have the flexibility to access their capital in the near future.
The S&P 500 index is currently expensive, equal to 25 times future earnings, with the tech sector - including Microsoft, Apple, and Nvidia - representing over 30% of the entire index. Many of these stocks are being pushed higher today by the artificial intelligence frenzy. If these market leaders suffer one or more setbacks in the coming quarters, the S&P 500 could fall significantly.
That said, Vanguard’s S&P 500 ETF remains a good long-term bet for investors who don’t plan to cash out for dozens of years.
| DISCLAIMER The information and considerations in this article should not be used as the sole or primary basis for making investment decisions. The reader retains full freedom in his own investment choices and full responsibility in making them, since he alone knows his risk propensity and his time horizon. The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation to public savings. |
Original article published on Money.it Italy 2024-06-19 16:19:00. Original title: Se investi €100 al mese su questo ETF potresti guadagnarne €45.000
