Can Monthly $400 Investments in an S&P 500 Index Fund Really Build $835,000? What the Data Shows

Why the Vanguard S&P 500 ETF Has Become the Go-To Choice for Long-Term Investors

One of the most enduring pieces of financial wisdom comes from Warren Buffett, who has consistently advocated for individual investors to embrace broad market exposure through index funds rather than attempting to pick winning stocks. The Vanguard S&P 500 ETF represents one of the most straightforward ways to implement this philosophy, offering direct access to 500 of America’s largest companies across all sectors.

The fund’s structure is elegantly simple: it mirrors the performance of the S&P 500 benchmark, which encompasses roughly 80% of the U.S. equities market by value and approximately 40% of global equities. This provides investors with instant diversification across industries and company sizes—from established blue-chip names to emerging market leaders.

The Concentration Question: Understanding the Index’s Top Holdings

The portfolio’s top-weighted positions reveal why the index has become so influential in modern markets. The leading 10 holdings are:

• Nvidia — 8.4% weight
• Apple — 6.8%
• Microsoft — 6.5%
• Alphabet — 5%
• Amazon — 4%
• Broadcom — 3%
• Meta Platforms — 2.4%
• Tesla — 2.1%
• Berkshire Hathaway — 1.5%
• JPMorgan Chase — 1.4%

These ten companies collectively represent 41% of the index’s market capitalization—a statistic that initially appears alarming to many observers. However, a more nuanced analysis reveals these firms also generate approximately 33% of the S&P 500’s total earnings. Their premium valuations reflect genuine competitive advantages and market positions that have withstood decades of disruption.

The Vanguard Difference: Why Low Costs Matter for Long-Term Returns

The Vanguard S&P 500 ETF distinguishes itself through an exceptionally low expense ratio of 0.03%—meaning investors pay only $3 annually per $10,000 invested. This minimal drag on returns compounds dramatically over extended holding periods.

When comparing broad-based equity managers, the data is sobering: fewer than 15% of large-cap fund managers successfully outperformed the S&P 500 over the past decade. This outcome creates a compelling argument for passive indexing—if the majority of professional money managers cannot beat the benchmark, what hope do individual stock pickers have?

Warren Buffett articulated this principle in his 2013 shareholder letter: “The goal of the non-professional should not be to pick winners…they should seek to own a cross-section of businesses that in aggregate are bound to do well.”

The Historical Case: What $400 Monthly Could Become

The mathematical foundation for this strategy rests on three decades of demonstrated performance. The S&P 500 has delivered cumulative returns of 1,810%, compounding at an annual rate of 10.3%. This growth trajectory encompasses diverse economic cycles—recessions, recoveries, technological shifts, and geopolitical events—suggesting the pattern may prove repeatable.

At this historical pace, a systematic investment approach produces striking results:

• $77,000 accumulated after 10 years
• $284,000 accumulated after 20 years
• $835,000 accumulated after 30 years

These figures assume consistent monthly investments of $400 and reinvestment of dividends. The S&P 500 has never generated negative returns across any rolling 15-year period since its 1957 inception—a remarkable track record for a market-cap weighted index.

A Balanced Approach: Index Funds and Individual Stock Selection

The choice between passive index investing and active stock picking need not be binary. Investors with the discipline and research capacity to evaluate individual companies can combine both approaches: maintain a core position in an S&P 500 index fund while allocating a portion of capital to individual security selection. If individual picks outperform, the portfolio exceeds index returns; if they underperform, the index foundation prevents catastrophic underperformance.

This hybrid strategy captures the benefits of both worlds without requiring the expertise that has proven elusive even for professional portfolio managers.