Got an Extra $50? Here's What You Could Make in 20 Years by Investing in an S&P 500 ETF

The S&P 500 index has long been a cornerstone of many investment portfolios, offering a blend of diversification, historical stability, and long-term potential for growth.

As the S&P 500 continues to deliver a strong performance, reaching all-time highs, some investors wonder if now is a good time to invest in S&P 500 exchange-traded funds (ETFs). But what if you're concerned you don't have enough to invest?

You can start small. This article explores the potential returns of investing just $50 per month in an S&P 500 ETF over 20 years, demonstrating how consistent investments can grow significantly over time.

S&P 500 Average Return and Historical Performance

To understand the potential of investing in the S&P 500, it's good to review its historical performance. Since its formation in the 1920s, the S&P has returned a consistent average annualized return of just over 10%. As of Nov. 14, 2024, the S&P 500 index has grown 25.48% year-to-date.

Here are its current returns:

This doesn't mean that the index always goes up—in fact, during years with recessions and bear markets, the index has lost value. Still, the S&P 500 has demonstrated remarkable consistency and growth over long periods. In the table below, we adjusted the index's annual returns for inflation, giving you the real returns for each year since 1950.

Investing $50 Per Month for the Next 20 Years

Let's now turn to our scenario: You'll invest $50 per month (a total of $600 per year) in an S&P 500 ETF for the next 20 years. ETFs are like mutual funds, except you can trade shares in them like you would trade any stock in a brokerage account.

While most people say for simplicity's sake that they are investing in the S&P 500, they're really investing in an ETF that's mirroring the companies in the index and their relative sizes. As such, your $50 is buying a share of all 500 of the country's most successful companies, from Apple (AAPL) to Amazon (AMZN) to Coca-Cola (KO).

Investing a fixed amount, like $50 every month, can be one of the smartest ways to build wealth over time. When you invest the same amount monthly, you naturally buy more shares when prices are low and fewer when they're high—like automatically getting better deals without trying to time the market. This strategy, known as dollar-cost averaging (DCA), takes the guesswork out of knowing when to invest.

Here are the most popular S&P 500 ETFs by the amount invested in them:

What Can I Make Investing $50 at a Time?

Based on the S&P 500's historical performance of about 10% annual returns (before inflation), here's what could happen to your monthly $50 investment:

• Initial monthly investment: $50
• Investment period: 20 years
• Assumed average annual return: 11%

At first, the changes seem small, but over time, your money starts to pick up speed. This happens because you're earning returns not just on your $50 deposits but also on all the previous earnings—what investors call "compound growth."

Using a compound interest calculator, we find that after 20 years, your total investment could grow to about $43,700. This breaks down as follows:

• Total amount invested: $12,000 ($50 × 12 months × 20 years)
• Total gains: $31,700

This calculation doesn't account for taxes, fees, commissions, or inflation, which would cut the real-world purchasing power of your returns.

Below, we accounted for inflation, taxes, ETF fees, and dividends you would have received in the past 20 years. You can hover over the chart to see specific changes in your investment's value over time. These projections are based on historical averages. Some years were better, some worse. The key is staying consistent with your $50 investment regardless of what the market does in any given year.

The Bottom Line

Investing $50 per month in an S&P 500 ETF over 20 years can grow into a significant sum—potentially over $40,000—thanks to the power of compound interest and the historical performance of the index. While past performance doesn't guarantee future results, the S&P 500's track record of long-term growth and diversification makes it an attractive option for many investors.

Any investment strategy you choose should align with your personal financial goals, risk tolerance, and time horizon. Consider consulting with a financial advisor to determine the best approach for your individual circumstances. Whether you're just starting with $50 a month or have more to invest, the key is to begin early and remain consistent over time.