History says investing $375 per month in the Vanguard S&P 500 ETF can build a $798,600 portfolio that pays $13,500 in annual dividend income in three decades.
The S&P 500 beat benchmarks for most other asset classes during the last two decades and has never generated a negative return over any 15-year period.
The S&P 500 achieved a total return of 1,860% over the last three decades, and it paid an average dividend yield of 1.7% during that last 10 years.
The median annual income for full-time workers ages 25 to 34 was approximately $60,000 as of September 2025. That would be about $45,500 after federal and state income taxes even in the worst scenario. Financial advisors recommend saving 20% of after-tax income for retirement, which means $9,100 per year ($758 per month) for the median worker in that age group.
However, even half that sum could grow into a sizable portfolio given enough time. History says $375 invested monthly in the Vanguard S&P 500 ETF(NYSEMKT: VOO) could grow into $798,600 over three decades, and that sum would then generate $13,500 in annual dividend income. Read on to learn more.
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The Vanguard S&P 500 ETF tracks the S&P 500(SNPINDEX: ^GSPC), an index comprising 500 large U.S. stocks that cover about 80% of domestic equities and 40% of global equities by market capitalization.
In that sense, the Vanguard S&P 500 ETF is a ready-made portfolio that provides diversified exposure to many of the most influential companies in the world. The five largest holdings are listed by weight below:
Nvidia: 7.3%
Apple: 7%
Microsoft: 6.2%
Alphabet: 5.7%
Amazon: 3.8%
The Vanguard S&P 500 ETF has an expense ratio of 0.03%, meaning shareholders will pay just $3 annually on every $10,000 invested in the fund. That is well below the average expense ratio of 0.34% on U.S. index funds and mutual funds. Beyond that, the investment thesis for the Vanguard S&P 500 ETF may be summarized in three points:
The S&P 500 outperformed benchmarks for most other asset classes in the last 20 years, including international stocks, fixed income, real estate, and precious metals.
Less than 12% of large-cap funds beat the S&P 500 over the last 15 years, meaning even professional money managers struggle to outperform the index over long periods.
The S&P 500 has never yielded a negative return over any 15-year period since 1950, which means gains are virtually guaranteed for patient investors.
Here’s the bottom line: Not many diversified index funds have a track record that rivals the Vanguard S&P 500 ETF, and even fewer have a lower expense ratio.
The S&P 500 achieved a total return of 1,860% over the last three decades, which equates to 10.4% annually despite the index suffering four bear markets and the economy suffering three recessions. So, investors can be reasonably confident that the S&P 500 will produce similar returns over long periods in the future.
At that rate, $375 invested monthly in the Vanguard S&P 500 ETF would be worth $798,600 in three decades. At that point, you could stop reinvesting the dividends. The S&P 500 paid an average dividend yield of 1.7% during the last decade, which means a $798,600 portfolio would generate about $13,500 in annual dividend income.
Importantly, the principle amount will keep growing (provided the stock market keeps moving higher) without reinvested dividends. For instance, the S&P 500 returned 8.4% annually over the last three decades excluding dividends. At that pace, the $798,600 portfolio would be worth $1.3 million in another five years, and that sum would pay $22,100 in annual dividend income.
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Trevor Jennewine has positions in Amazon, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
