Would you like to have a million dollars in retirement? 2 simple index funds to buy and hold for decades

You don’t have to chase the next 10-bagger stock, dive into risky options, or go all-in on cryptocurrencies to aim for a million-dollar retirement fund.

In reality, these strategies are more likely to erode your wealth than build it. Instead, imagine a simpler and more reliable path to financial security: investing in a S&P 500 Index funds.

Starting with just $10,000 and practicing passive investing could be the key to reaching that seven-figure amount. This approach is not about getting rich quick, but rather about building wealth steadily and securely over time.

A historical example

Imagine this: In 1980, you invested $10,000 in an S&P 500 index fund. Today, the initial investment has increased to $1,135,092.85, representing a compound annual growth rate (CAGR) of 11.11%.

Their strategy was simple: buy once, set dividends to be automatically reinvested, and then just let it sit. Why did that work? Essentially, you’ve placed a long-term bet on the continued growth of 500 of the most significant U.S. companies.

It hasn’t always been smooth sailing – the average annual fluctuation was 17.95%, and in 2008 you saw almost 55.25% of your investment evaporate during the Great Financial Crisis.

However, by persevering through ups and downs – literally doing nothing – you have reaped considerable rewards and perhaps become a millionaire in the most effortless way possible.

Which means to buy?

For exposure to the S&P 500 index, you have two excellent, low-cost ETF options, both from Vanguard, a very reputable asset manager.

Firstly, the Vanguard S&P 500 Index ETF (TSX:VFV) is denominated in Canadian dollars and has a low expense ratio of 0.09%.

It’s an excellent choice if you use a commission-free platform like Wealthsimple for your Tax-Free Savings Account (TFSA).

Alternatively, if you have a Registered Retirement Savings Plan (RRSP) with Interactive Brokers that offers low currency conversion fees, you might consider investing Vanguard S&P 500 ETF (NYSEMKT:VOO) in US dollars.

A key advantage of using VOO within an RRSP is that there is no 15% foreign withholding tax on dividends.