Ben Gran, The Motley Fool
5 min read
The stock market has been so good for so long, that it’s making some investors suspicious. The S&P 500 index (SNPINDEX: ^GSPC) has delivered a total return of 593% in the past 15 years. The tech-heavy Nasdaq-100 index has done even better with a total return of 1,150% during that time.
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Can the good times on Wall Street really keep going? What if the artificial intelligence (AI) boom that has powered hundreds of billions of dollars of capital expenditure and investor excitement turns out to be overvalued and overhyped? What if we’re overdue for a bear market?
During any given day, month, or year, the stock market can lose value. This is why day trading and short-term speculation can be so risky and unlikely to succeed. But I’m not focused on what happens in the stock market tomorrow or this year.
Any money I invest today is going to be left invested for the next 10 years or more. And as a long-term investor, I believe that no matter what happens next, as a long-term investor, it’s a good decision to keep investing in the Vanguard Morningstar Total Stock Market ETF (NYSEMKT: VTI).
Let’s look at the broader picture of why I’m going to keep investing in VTI today, tomorrow, and hopefully for years to come.
The U.S. stock market has delivered 10% annualized returns for 98 years
When most people talk about “the stock market,” they mean the S&P 500 index. These 500 names represent the largest publicly traded companies in America. For the past 98 years since 1928, the S&P 500 has delivered average annual returns of about 10% per year.
This is a quietly remarkable fact. It deserves more attention. Just by buying and holding a low-cost S&P 500 exchange-traded fund (ETF) for many years, investors can gain significant wealth. With 10% average annual returns, $200 invested per month over the course of a 40-year working career would grow to more than $1 million .
Keep in mind that the 10% average annual return of the S&P 500 includes all the major economic disasters and stock market crashes that have happened since 1928. The Great Depression, World War II, the 1970s energy crisis and high inflation, the dot-com bust, and the global financial crisis of 2008 didn’t stop long-term investors from achieving big gains.
