Investing a large lump sum to track the S&P 500 (SNPINDEX: ^GSPC) can be an effective set-it-and-forget-it strategy. Rather than trying to time the market or worry about investing in specific types of stocks, the broad index gives investors exposure to a wide range of companies. It’s that diversification that makes it a popular go-to option for long-term investors.
Based on 2022 data from the Federal Reserve, the average amount that Americans had saved up ranged between $20,540 and $72,520. This includes savings accounts as well as other transactional accounts (e.g., checking, money market, and brokerage cash accounts). Below, I’ll look at how much a balance at the lower end of that range, around $20,000, might grow over the long term when investing in S&P 500 index funds.
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Why the S&P 500 could be due for lower-than-typical returns
If the S&P 500 finishes 2026 strong, this could end up being the fourth consecutive year that it generates an annual return of more than 10% (its long-run average). When that happens, that’s a sign that stocks are expensive, and it may set the stage for lower future returns.
While there’s no crystal ball to know for sure what the future growth rate will be, it’s important to consider the possibility of more modest returns in the long run, in order to set realistic expectations. The good news is that even at a reduced rate, there’s ample incentive to buy and hold.
A $20,000 investment could grow to more than six figures after 20 years
In the table below, I’ve outlined the projected portfolio balance at different five-year periods and varying growth rates, if the market generates average returns, underperforms, or overperforms.
Table and calculations by author.
Returns will vary significantly depending on the investment, but after 20 years, even with more modest growth of about 9%, a $20,000 portfolio can reach six figures.
The big takeaway, however, is just how important it is to allow that balance to grow to six figures, because the effects of compounding afterward become much more significant. At 10% growth, for instance, the balance will grow by around $110,000 during the first 20 years, but by around $770,000 during the next 20 years.
