1 Vanguard Index Fund Could Turn $450 Per Month Into a $976,700 Portfolio That Pays $17,500 in Annual Dividend Income

Key Points

• Over 30 years, $450 invested monthly in the Vanguard S&P 500 ETF could build a $976,700 portfolio that pays $17,500 in annual dividend income.

• The S&P 500 beat benchmarks for most other asset classes during the last two decades, and has never generated a negative return over any 15-year period.

• The S&P 500 achieved a total return of 1,900% over the last three decades, and it paid an average dividend yield of 1.8% during that period.

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The median annual income for full-time workers aged 25 to 34 was about $59,200 as of June 2025. That would be about $45,000 after federal and state taxes even in the worst scenario. Financial advisors usually recommend saving 20% of after-tax income for retirement, which means $9,000 per year ($750 per month) for the median worker in that age group.

However, even a percentage of that sum could grow into a sizable portfolio given sufficient time. History says $450 invested monthly in the Vanguard S&P 500 ETF (NYSEMKT: VOO) could grow into $976,700 over three decades, and that sum would then generate $17,500 in annual dividend income. Read on to learn more.

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The Vanguard S&P 500 ETF provides exposure to many of the most influential stocks in the world

The Vanguard S&P 500 ETF tracks the S&P 500 (SNPINDEX: ^GSPC), an index comprising 500 large U.S. stocks that cover about 80% of domestic equities and 40% of global equities by market capitalization.

In that sense, the Vanguard S&P 500 ETF is a readymade portfolio that provides diversified exposure to many of the most influential companies in the world. The five largest holdings are listed by weight below:

1. Nvidia: 7.7%
2. Microsoft: 6.8%
3. Apple: 6.3%
4. Alphabet: 4.1%
5. Amazon: 3.9%

The Vanguard S&P 500 ETF has an expense ratio of 0.03%, meaning shareholders will pay just $3 annually on every $10,000 invested in the product. That is well below the average expense ratio of 0.34% on U.S. index funds and mutual funds. Beyond that, the investment thesis for the Vanguard S&P 500 ETF be summarized in three points.

• The S&P 500 outperformed benchmarks for most other asset classes during the last 20 years, including international stocks, fixed income, real estate, and precious metals.
• Less than 12% of large-cap funds beat the S&P 500 over the last 15 years, meaning even professional money managers struggle to outperform the index over long periods.
• The S&P 500 has never generated a negative return over any 15-year period since 1950, which means patient investors are virtually guaranteed to profit given enough time.

Here's the bottom line: Not many diversified index funds have a track record that rivals the Vanguard S&P 500 ETF, and even fewer have a lower expense ratio.

The Vanguard S&P 500 ETF could turn $450 per month into a large portfolio that pays $17,500 in annual dividend income

The S&P 500 achieved a total return of 1,900% over the last three decades, which equates to 10.5% annually, despite the index suffering four bear markets and the economy suffering three recessions. With that track record, investors can be reasonably confident the S&P 500 will yield similar returns over long periods in the future.

At that rate, $450 invested monthly in the Vanguard S&P 500 ETF would be worth $976,700 in three decades. At that point, you could stop reinvesting the dividends. The S&P 500 paid an average dividend yield of 1.8% during the last three decades, which means a $976,700 portfolio would pay about $17,500 in annual dividend income.

Importantly, the principle amount will keep growing (provided the stock market keeps going up) without reinvested dividends. For instance, the S&P 500 returned 8.4% annually over the last three decades excluding dividends. At that pace, the $976,700 portfolio would be worth $1.4 million in another five years, and that sum would pay $26,300 in annual dividend income.

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Trevor Jennewine has positions in Amazon, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.