Warren Buffett Says Most Investors Should Buy the S&P 500. Here’s How Much You Can Actually Earn With This ETF.
Warren Buffett is a legendary investor who might be the all-time greatest at picking individual stocks. During 60 years as CEO of Berkshire Hathaway (BRKA +0.68%)(BRKB +0.30%), Buffett delivered total returns of 5.5 million percent, a rate of nearly 20% per year.
But Buffett didn’t tell other people to follow his example. Instead of advising others to invest like him by picking individual stocks, Warren Buffett said that most investors should consistently buy low-cost index funds, like an S&P 500 exchange-traded fund (ETF).
One of the most popular and low-cost ETFs that fits this strategy is the Vanguard S&P 500 ETF (VOO -0.36%). In the 98 years since 1928, the S&P 500 (^GSPC -0.30%) index has delivered average annual returns of 9.98%. The Vanguard S&P 500 ETF has been around for less time, only 16 years. But since the fund’s inception in September 2010, VOO has delivered annualized returns of 14.94%.
Let’s look at why you might want to invest in VOO instead of investing like Warren Buffett — and how much money you could earn with this S&P 500 ETF in the long run.
Warren Buffett. Image source: Getty Images.
Why buy S&P 500 ETFs — almost any time
I don’t think anyone else will ever get as rich as Warren Buffett with the same investing strategy he used. He bought great companies when their stock prices were low. He found underpriced value stocks that other investors overlooked. He swooped in and “bought the dip” during times of crisis when other investors were afraid to deploy cash. He held onto winning investments for decades. He had some extraordinary good luck and overcame some big investing mistakes along the way.
But even though Warren Buffett was humble about his own personal approach to investing, he was always confident about America’s economy and the long-term future of the overall U.S. stock market. In 2021 in his annual letter to Berkshire shareholders, Buffett wrote, “never bet against America.”
Buying an S&P 500 ETF like VOO is a good way to bet on America. This ETF contains the 500 largest publicly traded companies in the U.S., making up about 80% of the total U.S. stock market. If the U.S. economy does well, the S&P 500 will tend to do well. Buying the Vanguard S&P 500 ETF lets you own major tech names like Nvidia (NVDA -0.80%), Alphabet (GOOG -12.29%)(GOOGL -12.64%), and Apple (AAPL +1.48%), as well as household name brands like Johnson & Johnson (JNJ +1.53%), Visa (V +2.48%) and Walmart (WMT +2.09%).
The S&P 500 doesn’t always go up. It can sometimes crash or go into a bear market, like it did in 2022, when the Vanguard S&P 500 ETF delivered a negative total return of -18.15%. But in the past five years, even with that bad year in 2022, VOO has delivered annualized gains of about 13.8%.
VOO – Vanguard S&P 500 ETF
$707.32-$2.58 (-0.36%)
NYSEMKT · As of 4:00 PM ET 10/29/26
How much you can earn from 20 years of VOO investing
The best way to buy stocks is for the long term, and buying VOO is no different. No one knows what will happen to the stock market in the short run. But if you can hold onto your investments without selling them for five, 10, or 20 years (or longer), you are likely to see strong gains, based on historical performance.
Let’s assume that VOO delivers 9.98% average annual returns for the next 20 years. That’s not unreasonable; it’s the same long-term gain that the S&P 500 has delivered since 1928. If you could invest $300 per month in VOO and earn 9.98% annualized returns, here’s how much you’d earn after 5, 10, 15, and 20 years:
Year
Investment balance
5
$21,970
10
$57,320
15
$114,200
20
$205,722
Data source: Author’s calculations, Investor.gov compound interest calculator
What if you could invest even more, and put $500 a month into VOO for 20 years? Here’s how much your investments would grow at 9.98% average annual returns:
Year
Investment balance
5
$36,616
10
$95,533
15
$190,333
20
$342,870
Data source: Author’s calculations, Investor.gov compound interest calculator
There is no guarantee that the S&P 500 will keep delivering the kinds of strong returns we’ve seen in the past five years. It might not even deliver the same 9.98% annualized return in the future. But if you want to own a diversified mix of stocks that lets you buy into the future of the U.S. economy, the Vanguard S&P 500 ETF is one of the easiest ways to do it.
You don’t have to invest like Warren Buffett. But if you follow his example by “betting on America,” you’re likely to do well in the long run.
Source: www.fool.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.