A lot of people think it takes a lot of money to make money investing in the stock market. In reality, any investment can do the job. Even small monthly investments made consistently over the course of decades.

For many people, a simple $100 monthly investment in the S&P 500 (^GSPC -0.25%) is achievable. It may not sound like much, but how large can your investment grow if you keep investing for 20 years?

Let’s do the math.

Dollar bills growing in a garden.

Source: Getty Images.

What $100 a month in the S&P 500 turns into

Historically, the S&P 500 has generated an average annual return of around 10% over the past century. While returns can fluctuate significantly in the short term, a 10% annual rate of return assumption gives us a good benchmark to work with.

Assuming an investor starts with nothing and consistently contributes $100 a month to something like the Vanguard S&P 500 ETF (VOO -0.21%), at a 10% average annual return, those investments would turn into roughly $76,000. 

That means your total of $24,000 in contributions would have generated roughly $52,000 in investment gains. Once the snowball effect of those monthly investments accelerates, the majority of your returns come from compounding, not from the investments themselves.

Vanguard S&P 500 ETF Stock Quote

Today’s Change

(-0.21%) $-1.51

Current Price

$707.24

Consistency matters more than anything

Most people assume that the rate of return you see on your investments is the most important factor in how big your portfolio can become. There’s no question it’s a major catalyst, but it’s not the biggest one.

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The ability to consistently contribute to your investment account is perhaps the most important thing for long-term wealth creation.

There will be times when the market declines, occasionally very significantly. But it’s the ability to continue investing through those times that could create the biggest benefit. That’s because in those situations, you’re buying shares at a discount. Taking advantage of those periods could actually improve your long-term returns over pausing your investments when the market gets rougher.

David Dierking 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.


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Shin John
Shin JohnYtv Market News
Share-market news writer and analyst with deep experience covering equities, commodities, forex, and cryptocurrencies for readers in the USA, UK, Canada, and Australia. Ytv Market News delivers timely market updates, practical trading insights, and clear explanations of macro and company-level catalysts that move prices. Combines on-the-ground financial reporting with technical analysis, using concise charts and actionable ideas to help investors and traders make smarter decisions.