Many people are hesitant to invest in stocks or stock index funds in a brokerage account simply because they see it as a risky thing to do with money. And if we’re talking about a period of several months, or even several years, there’s a solid argument that this is true.

On the other hand, you might be surprised at how predictable stock market performance can be over decades-long periods. When there’s no way to know Definitely We can certainly use history as a guide to what will happen in the next 10, 20 or 30 years. With that in mind, here’s how much a $10,000 investment in a basic S&P 500 index fund could grow by the middle of this century.

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Historical stock performance

The S&P 500 index is considered the best overall indicator of the performance of the US stock market. And it can be quite volatile over short periods of time. Since 1965, the S&P 500 has gained as much as 37.6 percent or lost as much as 37 percent in any given year. In the Great Recession of 2007-09, the index lost more than 50% of its value before reaching the bottom.

But over the long term, S&P 500 returns are surprisingly predictable. The exact performance depends on the specific time period you look at, but over most ten-year periods the S&P 500 has returned around 10% on an annualized basis. Using the “since 1965” period as an example, the S&P 500 returned an average of 10.2% per year from 1965 through the end of 2023.

How much can $10,000 grow by 2050?

To simplify, let’s assume the S&P 500 produces a 10% annual return over the next few decades. Of course, in some years returns will be higher, in others they will be (much) lower, but we are talking about the long-term average.

Since it’s almost 2025, we’ll use a 25-year period until 2050. So, if we take a $10,000 investment and combine it with a 10% annual return over a 25-year period, you get more than $108,000.

Again, this is based solely on past performance and does not guarantee future results. In other words, the S&P 500’s real rate of return between now and 2025 is unlikely Definitely 10% on an annual basis. But the point is that the stock market has the ability to turn relatively small investments into much larger sums of money over long periods of time.

Take it one step further

Of course, this is what can happen if you make a change. one time Investing $10,000 in an S&P 500 index fund through a broker or investing app and leaving it alone.

Now imagine doing this and also adding a few thousand dollars to your investment each year and letting it grow over time. If you invested $10,000 in an S&P 500 index fund today and added $500 per month to your investment by 2050, you would have a nest egg of approximately $700,000 based on a 10% annual rate of return.

If you’ve ever heard someone say that the stock market has outperformed every other major asset class over time, it’s true. It’s unlikely to grow in a straight line over time, but if you invest consistently and give your investments a long period of time to grow, it’s extremely likely that you’ll have much more money than when you started.