S&P 500 Index Fund Investing: Returns and Buffett’s Pick

Imagine setting aside $10,000 twenty years ago and simply letting it ride in the stock market. That single decision, if placed in an S&P 500 index fund, would have turned into roughly $67,000 today — even without adding a penny more.

Index name: S&P 500 (INDEXSP: .INX) ·
Approximate current value: 7,798.99 (as of Aug 13, 2024) ·
Number of holdings: 500 large-cap U.S. companies ·
Long-term average annual return: ~10% (since inception) ·
Typical expense ratio for index funds: 0.03%–0.10%

Several key numbers tell the story of S&P 500 index investing at a glance.

The pattern: six numbers, one outcome — consistent contributions and a long time horizon have historically turned modest savings into meaningful wealth.

What if I invested $10,000 in the S&P 500 20 years ago?

If you had put $10,000 into an S&P 500 index fund in mid-2004 and reinvested dividends, that stake would be worth about $67,000 today, according to The Motley Fool (investment research publisher). That’s a total return of approximately 570% — or roughly 10% annualized. The same calculation shows that adding just $100 per month would have produced around $136,000, nearly doubling the final sum despite adding only $24,000 in extra contributions.

The implication: even a modest monthly habit can dramatically accelerate compounding.

What if I invested $1,000 a month in the S&P 500?

Investing $1,000 each month into an S&P 500 index fund would build a portfolio that, based on historical returns, would be worth roughly $1.6 million after 30 years, using a 10% annual return assumption. Yahoo Finance (financial news platform) projects that $500 a month in the Vanguard S&P 500 ETF could reach over $1 million after 30 years. Doubling that to $1,000 a month would roughly double the outcome, given the same return rate.

The trade-off: $1,000 a month is a serious commitment. For most people, starting with what they can afford and increasing contributions over time is more practical.

What S&P 500 index fund does Warren Buffett recommend?

Warren Buffett has repeatedly advised trustees and individual investors to put 90% of their assets into a low-cost S&P 500 index fund. In his 2013 Berkshire Hathaway shareholder letter, he wrote that his instruction for his wife’s trust was to invest 10% in short-term government bonds and 90% in a very low-cost S&P 500 index fund, as reported by Yahoo Finance. The fund most commonly associated with that advice is the Vanguard S&P 500 ETF (VOO), which charges an expense ratio of just 0.03%.

“For most people, the best thing to do is buy an S&P 500 index fund.”

Warren Buffett, Berkshire Hathaway 2021 annual meeting (via Yahoo Finance)

The pattern: Buffett’s advice hasn’t changed in decades — the simplest, cheapest option consistently beats expensive active management for the vast majority of savers.

What is the average return on a S&P 500 index fund?

The S&P 500 has delivered an average annual return of roughly 10% (nominal) since its inception in the 1920s. Capital Group (investment management firm) cites a ~10% long-term average. Investopedia (financial education site) calculates the annualized return from 1950 to 2025 at 11.59%. Inflation-adjusted (real) returns are typically in the 7-8% range.

Why this matters: using 10% as a planning assumption is reasonable for long-term projections, but investors should be prepared for significant volatility along the way.

What is the best index fund to buy right now?

“Best” depends on your brokerage and goals, but three S&P 500 ETFs dominate: Vanguard S&P 500 ETF (VOO, 0.03% expense ratio), iShares Core S&P 500 ETF (IVV, 0.03%), and SPDR S&P 500 ETF Trust (SPY, 0.0945%). All track the same index. VOO and IVV are slightly cheaper, while SPY offers more options trading. Investopedia notes that for long-term buy-and-hold investors, the difference in expense ratios between these funds is negligible, but VOO and IVV edge out SPY on cost.

The implication: pick the fund available at your brokerage with the lowest expense ratio. The most important factor is starting — not which exact ETF you choose.

What we know for sure — and what’s still uncertain

Confirmed facts

• The S&P 500 has historically returned about 10% per year over long periods (Capital Group)
• Warren Buffett recommends a low-cost S&P 500 index fund for most investors (Yahoo Finance)
• A $10,000 investment 20 years ago grew to more than $65,000 with dividends reinvested (The Motley Fool)

What’s unclear

• Exact future returns cannot be predicted
• The precise value of a past investment depends on exact timing and reinvestment assumptions
• The optimal fund choice varies by broker and personal tax situation

Key voices on S&P 500 index fund investing

“My advice to the trustee couldn’t be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund.”

Warren Buffett, 2013 Berkshire Hathaway shareholder letter (via Yahoo Finance)

“For most people, the best thing to do is buy an S&P 500 index fund and hang on to it.”

Warren Buffett, Berkshire Hathaway 2021 annual meeting (via Yahoo Finance)

Buffett’s consistent message across a decade underscores that the strategy is not a passing fad — it’s a core principle from an investor with a track record that speaks for itself.

Summary

The numbers are clear: a disciplined, low-cost S&P 500 index fund approach has historically turned consistent savings into substantial wealth. Monthly investing harnesses dollar-cost averaging and compounds powerfully over decades. For the majority of savers who want to build long-term wealth without gambling on individual stocks or paying high fees, the verdict from Warren Buffett and the data is the same: buy a low-cost S&P 500 index fund, reinvest dividends, and stay the course. The investor starting today should set up an automatic transfer into VOO, IVV, or SPY and let time do the heavy lifting.

Related reading: **S&P 500 Guide: History, Returns, and How to Invest**

Frequently asked questions