See how your investments could grow over time based on historical S&P 500 performance and compound interest.
The S&P 500 (Standard & Poor's 500) is a stock market index tracking the performance of 500 large companies listed on stock exchanges in the United States. It is widely considered one of the best gauges of large-cap U.S. equities.
Historically, the S&P 500 has returned about 10% annually on average before inflation. After accounting for inflation, the average annual return is closer to 7%. However, it's important to note that returns can vary significantly from year to year, with some years seeing negative returns and others seeing returns well above the average.
The most common way to invest in the S&P 500 is through index funds or ETFs (Exchange-Traded Funds) that track the performance of the S&P 500. Popular options include funds offered by Vanguard (VOO), Fidelity (FXAIX), and Charles Schwab (SWPPX). These funds allow you to gain exposure to all 500 companies with a single investment.
Compound interest allows your investments to grow exponentially over time as you earn returns not just on your initial investment, but also on the accumulated interest. This calculator demonstrates how powerful compounding can be, especially over longer time periods. Einstein reportedly called compound interest "the eighth wonder of the world."
The amount you should invest depends on your financial situation, goals, and risk tolerance. Many financial advisors recommend investing 10-15% of your income for retirement. This calculator can help you see how different investment amounts might grow over time, but it's always best to consult with a financial advisor for personalized advice.
S&P 500 returns are influenced by numerous factors including economic conditions, corporate earnings, interest rates, inflation, government policies, global events, and investor sentiment. The variance feature in our calculator helps simulate the natural fluctuations you might experience when investing in the market.
Historically, the S&P 500 has proven to be an excellent long-term investment, consistently outperforming many other asset classes over periods of 10+ years. While past performance doesn't guarantee future results, the S&P 500's diversification across 500 leading U.S. companies provides exposure to the growth of the American economy, making it a cornerstone of many long-term investment strategies.