I find it helpful to set financial goals and milestones, no matter how small they are. This gives me a “purpose” behind good financial management and provides me with additional reason to be disciplined in difficult situations.

A common step on the path to million dollar wallet is the $500,000 mark. And you don’t need to invest a lump sum to get there either. All you have to do is enjoy composition and make consistent investments of modest amounts.

If you’re looking to turn $250 a month into $500,000, the Vanguard S&P 500 ETF (VOO -0.30%) could be your ticket.

You can’t go wrong with this ETF’s historical returns

Past results are no guarantee of future performance, but they are worth examining to get a sense of potential. Since the exchange-traded fund (ETF) was established in September 2010, it has produced impressive returns.

VOO data by Y Charts.

Achieving annual returns of 12-14% over the long term would be exceptional, but let’s take a more conservative approach in our example. From the inception of the ETF until the end of the last bear market in 2022, it has averaged an annual return of around 10.6%, so we will retain this figure since this period is long enough to represent the market’s return over full economic cycles.

Investing $250 per month and earning an average annual return of 10.6% could get you to $500,000 in just over 29 years, which is the ETF’s 0.03% expense ratio.

It won’t happen overnight, but it’s definitely achievable if you invest throughout your career (which you should if you can).

Are you short on time? Increase your contributions.

A monthly amount of $250 is a modest amount to invest to reach $500,000, but time and capitalization make it possible. However, for those who may be a little older and don’t have 29-30 to reach the goal, a slight increase in your monthly contributions can still do the trick.

Here’s a look at how long it would take you to reach $500,000 by investing different monthly amounts and earning an average annual return of 10.6%.

Calculations by author. Years rounded to the nearest whole year. Calculations include the ETF’s 0.03% expense ratio.

What may seem like a small increase in monthly investments on paper can shave several years off the time it takes to reach $500,000.

What makes this ETF a good investment?

Historical returns aside, investing in a S&P500 ETF is one of the smartest decisions an investor can make. It’s a winning trio: diverse, led by blue chip companiesand low cost.

The S&P 500 tracks the 500 largest U.S. companies on the market. This ETF therefore constitutes some of the most successful and promising companies in the world. To give you an idea, take a look at its top 10 holdings (as of September 30):

• Apple: 7.25% of the ETF
• Microsoft: 6.55%
• Nvidia: 6.11%
• Amazon: 3.56%
• Metaplatforms: 2.56%
• Alphabet (Class A): 1.99%
• Berkshire Hathaway (Class B): 1.73%
• Alphabet (Class C): 1.64%
• Broadcom: 1.64%
• Tesla: 1.49%

When you’re investing for decades, you want to make sure you’re investing in companies that are well positioned for longevity, and that’s what you get with this ETF.

There will inevitably be ups and downs along the way, but over the long term, an S&P 500 ETF has proven to be a solid investment that you can rely on.

Let compound income do the heavy lifting for you

Regardless of your specific investments, investors should never lose sight of the power of compounding. When it comes to investing, the cumulative effect occurs when the money you earn from investing begins to earn money itself.

Imagine you invest $1,000 and get a 10% return, or $100. If you reinvest that $100 and also earn 10% on that amount, you will now earn 10% on your initial investment of $1,000 plus the $100 you earned previously. It’s a lucrative cycle that becomes more and more powerful over time.

In addition to having a lump sum to invest at once, taking advantage of the cumulative effect is the most surefire way to create wealth in the stock market and reach the $500,000 mark. All it takes is time and consistency.