If you invest $1,000 a month in the S&P 500, this is how much dividend income you could have in 30 years | The crazy motley

I’m a big fan of investing in individual stocks. As of this writing, I have about 35 individual stocks in my portfolio, and I believe it is entirely possible for active investors to beat the market over long periods of time.

However, this does not mean that you need to own individual stocks to build wealth over time. In fact, although I own a bunch of individual stocks, I have a large portion of my portfolio in low-cost index funds, including the Vanguard S&P 500 ETF (FLIGHT -0.30%).

In a given year, the S&P 500Performance may vary significantly. In fact, since 1965, the S&P 500 has produced total returns as high as 38% or as low as negative 37%. But over long periods of time, the S&P 500 has produced annualized returns of 9% to 10% depending on the exact period you look at.

And you might be surprised how much wealth the average person can create by simply investing early and regularly in the S&P 500. As legendary investor Warren Buffett said, “There’s no need to do things extraordinary to achieve extraordinary results.”

How much does $1,000 a month invest in the S&P 500 increase?

Of course, while the S&P 500 has been a reliable wealth creator over very long periods of time, there is no way to predict its performance with complete accuracy. If you invest over a 30-year period, it’s impossible to know exactly what kind of annualized returns you’ll get.

VOO Total Return Level Data by YCharts.

So, for the purposes of this discussion, we’ll assume that the S&P 500 averages an average of 9.5% annualized total returns for the entire period you’re invested. Some years it will be more, some years less, but we’ll assume that over the three decade period you’ll get this. (Note: This is a historically conservative assumption. Since 1965, the S&P 500 has averaged 10.2% total returns.)

We’ll also assume you’ll reinvest any dividends you receive along the way.

With that in mind, if you were to invest $1,000 per month ($12,000 per year) in an S&P 500 index fund at a growth rate of 9.5%, here’s how your money could grow over time:

Data source: author’s own calculations. Assumes 9.5% compound annual growth rate (CAGR) and dividend reinvestment.

How much dividend income will this produce?

In short, if you put $1,000 into an S&P 500 index fund every month and got an annualized return of 9.5%, you end up with about $1.8 million after 30 years.

As of January 2025, the Vanguard S&P 500 ETF’s dividend yield is approximately 1.2%, which is very low from a historical perspective thanks to the current concentration in mega-cap tech stocks that typically don’t pay little or no dividends. But even at this low return, a $1.8 million investment would produce $21,600 per year in dividend income.

However, the S&P’s median dividend yield since 1960 is approximately 2.9%. While there is no way to know what the S&P 500’s dividend yield will be in 30 years, using this historical average would mean that a $1.8 million investment would produce approximately $52,200 in annual dividend income.

Of course, this analysis made a lot of assumptions. And it’s important to point out that in 30 years, or whenever you reach retirement age, you probably won’t continue to keep all your money invested in stocks. Smart asset allocation would involve gradually moving some of your money into fixed-income instruments, like bonds and CDs, which generally have higher yields and are more stable.

But the point is to show the long-term compounding power of a seemingly boring investment and how it’s entirely possible to retire with millions of dollars (or much more) without learning stock analysis or doing much homework.