The common belief, particularly amongst those newly exposed to the stock market, is that fortunes are made by identifying the next dominant company. This is, to put it mildly, a simplification. There exist instruments, known as exchange-traded funds – or ETFs – which offer a different path, one based not on discernment, but on a broader, less glamorous principle. It is a system that relies on the aggregate, not the exceptional.
One such fund, the Vanguard S&P 500 ETF, has, over the past decade, provided a striking illustration of this principle. A consistent monthly investment of $3,700, applied diligently from January 2016 through December 2025, would, by the end of that period, have yielded approximately $1 million. It is a figure that invites attention, and perhaps a degree of skepticism.
The S&P 500 and the American Economy
Since the close of January 2016, the Vanguard S&P 500 ETF has delivered a total return of 336%, an annual rate of just under 14%. This exceeds the historical average of 10% – a discrepancy worth noting, as historical performance is never a guarantee of future results. An investment of $10,000 ten years ago would now be worth approximately $43,610. The underlying premise, of course, is a bet on the continued success of the American economy – a proposition not without its risks.
The strategy of dollar-cost averaging – investing a fixed amount at regular intervals – amplifies these returns. It removes the burden of attempting to ‘time’ the market, a futile exercise for most. Instead, it establishes a habit of consistent investment, regardless of prevailing market conditions. This discipline, it seems, can be a surprisingly effective path to wealth accumulation. However, to present it as a simple formula is to ignore the underlying complexities.
The Currents Beneath the Surface
The exceptional performance of the Vanguard S&P 500 ETF over the last decade is not solely attributable to economic fundamentals. A powerful trend has been the increasing flow of capital into passive investment vehicles. This creates demand for the constituent stocks, driving up prices. The democratization of access to brokerage accounts, coupled with the generally disappointing performance of actively managed funds, has further accelerated this shift. Investors, it appears, are increasingly opting for simplicity and low cost.
The economic landscape has also undergone a transformation. The technology sector now dominates, and companies operating within it have experienced rapid growth, generating substantial free cash flow and establishing formidable economic moats. This concentration of power, while beneficial to investors in the short term, raises questions about long-term stability and competition.
It is unlikely that these favorable conditions will persist indefinitely. While the Vanguard S&P 500 ETF may continue to deliver positive returns in the coming decade, investors should temper their expectations. The pursuit of ‘monster returns’ is a fool’s errand. A more realistic approach is to acknowledge the inherent uncertainties of the market and to focus on building a diversified portfolio that aligns with one’s long-term financial goals. To believe otherwise is to succumb to a comforting illusion.
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2026-01-28 13:22