Many people are hesitant to invest in stocks or stock index funds in a brokerage account simply because they see it as a risky activity with money. And if we’re talking about a period of a few months, or even a few years, there are strong arguments to say that this is true.

On the other hand, you might be surprised how predictable stock market performance can be over periods of decades. Although there’s no way of knowing Exactly what happens over the next 10, 20, 30 years, we can certainly use history as a guide. With that in mind, here’s how much a $10,000 investment in a core S&P 500 index fund could grow by the middle of this century.

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Historical stock market performance

The S&P 500 Index is widely considered the best overall indicator of U.S. stock market performance. And over short periods of time, it can be quite volatile. Since 1965, the S&P 500 has gained as much as 37.6% or lost as much as 37% in a single year. During the Great Recession of 2007-2009, the index lost more than 50% of its value before reaching its lowest level.

However, over the long term, S&P 500 returns are surprisingly predictable. Exact performance depends on the particular time period you’re looking at, but over most multi-decade periods, the S&P 500 has returned around 10% on an annualized basis. Taking the “since 1965” period as an example, the S&P 500 generated an average return of 10.2% per year from 1965 to the end of 2023.

How much could $10,000 increase by 2050?

To simplify, let’s say that the S&P 500 produced an annualized return of 10% for the next few decades. Of course, some years the returns will be higher, and in others they will be (much) lower, but we are talking about the long-term average here.

Since it’s almost 2025, we’ll use a 25 year time frame through 2050. So if we take a $10,000 investment and compound it to a 10% annualized return over a 25 year time frame, you’ll get more of $108,000.

Again, this is simply based on historical performance, which does not guarantee future results. In other words, the S&P 500’s real rate of return between now and 2025 likely won’t be the same. Exactly 10% once annualized. But the fact is that over long periods of time, the stock market has the ability to turn relatively small investments into much larger sums of money.

Go further

Of course, that’s what could happen if you made a once Invested $10,000 in an S&P 500 index fund through a broker or investing app and just left it alone.

Now imagine if you did that, but also added a few thousand dollars each year to your investment and let it grow over time. If you invested $10,000 in an S&P 500 index fund today and added $500 per month to your investment through 2050, you would end up with a nest egg of almost $700,000 based on an annualized rate of return of 10 %.

If you’ve ever heard someone say that over time the stock market outperforms every other major asset class, it’s true. It’s unlikely to increase linearly over time, but if you invest consistently and let your investments grow over a long period of time, it’s extremely likely that you’ll end up with a lot more money than you did when you started. departure.