Investing in the S&P 500? Here's Exactly What You'd Need to Save Each Month to Reach $1 Million.

One of the most effective ways to generate long-term wealth is to invest in the stock market, but you don’t need to be an investing expert to make a lot of money over time.

Sometimes, a simple and straightforward approach like investing in an S&P 500 (^GSPC 0.27%) index fund or ETF could help you reach $1 million or more with little effort. However, to build substantial wealth, you’ll need to invest consistently for many years.

Exactly how much you’ll need to invest each month will depend largely on your timeframe. If you have a goal of reaching $1 million with an S&P 500-tracking fund, here’s what it might take to get there.

Why invest in an S&P 500 fund?

First, it’s wise to double-check that this is the right investment for you. An S&P 500 index fund or ETF aims to mirror the index itself, so each fund will include stocks from 500 of the largest and strongest companies in the U.S.

S&P 500 funds can be a smart option if you’re looking for a hands-off investment that requires little effort on your end. It involves much less research than buying individual stocks, and you can achieve an instantly diversified portfolio with just one investment.

The S&P 500 itself also has a long track record of earning positive returns over time, making it a safer option than some other funds. In fact, data from investment research firm Crestmont Research shows that every 20-year period in the S&P 500’s history has ended in positive total returns. — This means that no matter when you’d invested, historically, you’d have made money as long as you held your investment for 20 years.

A potential downside to consider, however, is that this type of investment can only ever earn average returns. The S&P 500 is a key pillar behind the overall stock market. Because an S&P 500 index fund or ETF aims to follow the market, it’s impossible for it to beat the market. If your priority is earning above-average returns, this investment may not be ideal.

Reaching $1 million with the S&P 500

Historically, the S&P 500 itself has earned an average rate of return of around 7% per year. While there are never any guarantees in the stock market, there’s a good chance the index will continue seeing similar returns over the coming decades.

It’s also important to note that keeping your money in the market for the long haul can not only help maximize your earnings, but it can minimize risk, too. If you sell your investment after only one year, there’s a 27% chance you could lose money, according to research from investment firm Capital Group. But by holding your fund for 10 years, the chance of seeing negative returns drops to just 6%.

Even the S&P 500 can be volatile in the short term, but time is your friend when it comes to protecting your money. Before you buy, be sure you’re willing to keep your money in the market for at least a few years, or ideally decades.

Let’s say you’re investing in an S&P 500 index fund earning a 7% average annual return. At that rate, here’s approximately how much you’d need to invest each month to reach $1 million, depending on how many years you have to save:

Data source: Author’s calculations via investor.gov.

Again, time is one of the most powerful resources when maximizing your earnings in the stock market. The longer you wait to begin investing, the more difficult it will become to reach your goal.

S&P 500 index funds and ETFs can be fantastic options for beginners or those looking for a simple way to make money in the stock market. They may not be the best fit for those looking to earn above-average returns, but with enough time, you can still generate a substantial amount of wealth.