S&P 500 Investment Time Machine
Imagine you put $1,000 into either fund 10 years ago. You'd be up to roughly 126.4% — or $3,282 — from VOO and 126.9% — or $3,302 — from SPY. That's not exactly wealthy, but it shows how you can more than triple your money by holding an asset with relatively low long-term risk.
Mike Wilson predicts 'flat-ish' S&P 500 returns over the next decade due to high valuations. Current Shiller CAPE ratio levels suggest annualized returns in the 2-3% range over 10 years.
$3,000 X 12 months = $36,000 per year. $36,000 / 6% dividend yield = $600,000. On the other hand, if you're more risk-averse and prefer a portfolio yielding 2%, you'd need to invest $1.8 million to reach the $3,000 per month target: $3,000 X 12 months = $36,000 per year.
You would have more than doubled your money, with a total investment worth of $2,029.55. That's a 103% return, or a 7.23% annual rate of return. Interestingly, despite Coke's dominance on the world stage, investing in Coke's main rival, Pepsi, 10 years ago would have given you more pop for your buck.
In his 2013 letter to shareholders, Buffett revealed that his will advises his trustee to allocate 10% of the cash in short-term government bonds and 90% in a very-low cost S&P 500 index fund.
$10,000 invested in the S&P 500 at the beginning of 2000 would have grown to $32,527 over 20 years — an average return of 6.07% per year.
Is a rate of return of 8% a good average annual return? The answer is yes if you're investing in government bonds, which shouldn't be as risky as investing in stocks.
Invest in Dividend Stocks
Last but certainly not least, a stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income. However, at an example 4% dividend yield, you would need a portfolio worth $300,000, which is a substantial upfront investment.
Pros and Cons of Investing in 10-Year Treasury Bonds
10-year Treasury bonds offer multiple benefits, such as safety of principal and steady returns, but investors are wise to consider some of the disadvantages of the 10-year Treasury, including low yields and interest rate risk.
Keep It Simple:- Consider using low-cost index funds or ETFs to build your investment portfolio. These can provide diversification and potentially higher returns over the long term. Understand and Manage Risk:- While aiming for a 20% return, it's important to understand the associated risks.
The S&P 500 lost decade - 2000 to 2010
During this decade, S&P 500 investors had to deal with two market downturns - the aftermath of the .com bubble and the Global Financial Crisis (GFC). This led to the S&P 500 having a negative return over the decade (01/01/2000 - 31/12/2009).
Variable Rate of Return: Financial advisors often project an average rate of return for 401(k) plans between 5 to 8% over 20 to 30 years. However, this does not guarantee such returns due to market volatility and other factors.
“According to the strategy, retirees tap 4% of their nest egg the first year. For future withdrawals, they adjust the previous year's dollar figure upward for inflation,” per CNBC. According to Morningstar research, that “safe” withdrawal rate declined to 3.7% in 2025.
And you'll need to invest effectively, such as in a low-fee S&P 500 index fund. If you can invest $500 per month into the stock market and you earn its historical average annual return of roughly 10%, you'll be a millionaire in about 30 years. It will take about 21 years if you invest $1,250 per month.
If you're 40 years old reading this post, then you may likely have closers to only $200,000. When you were contributing, the 401k limits were lower. For 2022, an employee can now contribute $20,500 to their 401k. If you are a Financial Samurai, then you should have closer to $500,000+ in your 401k by age 40.
For our example, let's say you invest $10,000 in a 401(k) today and you aim to withdraw it in 20 years. While it's invested, you earn a 10% average annual return. After two decades, your $10,000 would be worth $67,275.
Although a Coke can is only worth about 5 cents, the 13 grams of aluminum it contains is worth only about 3 cents.
The benchmark index of US equities is projected to rise to 6,500 by the end of 2025, a 9% price gain from its current level and a 10% total return including dividends, David Kostin, chief US equity strategist at Goldman Sachs, writes in the team's report. Earnings are predicted to increase 11% in 2025 and 7% in 2026.
Amazon Stocks Price Target for 2030
We estimate Amazon's stock price to be $370 per share with 10% year-over-year revenue growth but compressed margins from more competition in its AWS unit.
S&P 500 could get close to 7,000 in the first half of next year, says Fundstrat's Tom Lee. Tom Lee, Fundstrat Global Advisors head of research, joins CNBC's 'Squawk Box' to discuss market outlooks, what to expect in 2025, and more.