How Much Investing $500 Per Month Can Give You

Investing $500 a month can lead to significant long-term growth, thanks to the power of compounding returns. Whether you are just starting out or adding to an existing portfolio, consistently investing $500 each month can help you build substantial savings for future goals, like retirement or a down payment on a house. The outcome of investing $500 per month depends on factors like investment returns, the time horizon and the type of investments you choose.

If you need help planning your investments and building a portfolio, consider working with a financial advisor.

How Much Can $500 in the Stock Market Earn You?

One of the most popular investments is the stock market, which has traditionally grown through every generation, even with downturns in the market from time to time.

Over time, the average return for the S&P 500 is about 10% per year. This means that if you put $100 per year into your portfolio, on average you will end the year with $110 in value.

Then again, the stock market can be volatile. It has good years and bad years, and returns can even vary drastically on a monthly or yearly basis.

This makes it a very difficult short-term investment. It can taken months or years for a portfolio to recover after big market losses. For investors with those years to wait, this is usually no problem. For investors who need their money sooner, this volatility can be an issue.

This makes investing in a pure S&P 500 index fund often a strong strategy for investors with years to wait. If you have time to let your money grow, this can be an excellent way to build wealth over time. If you have 10 or 20 years, you can turn that $500 per month into hundreds of thousands of dollars.

For example, if you were to invest $500 into an S&P 500 index fund for 10 years, you could have more than $101,000 by the end of the 10th year. If you took the same approach for 20 years, your money would grow to nearly $380,000 (assuming a 10% annual rate of return).

Monthly Investment	Time Horizon	Total Invested	Annual Average Rate of Return	Total Growth	Total
$500	10 years	$60,000	10%	$41,422	$101,422
$500	20 years	$120,000	10%	$259,684	$379,684

How Much Can $500 In Bonds Earn You?

Bonds are almost at the opposite end of the spectrum from stocks. Investment-grade bonds, generally meaning either government debt or corporate debt rated Baa or above, very rarely default. Historically speaking investors who buy good bonds almost always get their interest payments and their money back at the end. This makes bonds a great choice for security-conscious investors. If you’re worried about risk, bonds address that concern. If you’re worried about liquidity, the security of a bond repayment makes them a very salable instrument.

The tradeoff for this security? You collect quite a bit less on your investment over time. A bond is useful because it pays you its coupon rate, the interest on the note, generally in either quarterly or monthly installments. This gives you a steady stream of income, as opposed to stocks that you have to either sell and reinvest or simply hold over a long period of time. But you make less of a bond’s interest payment than the average return on the stock market. The market is at higher risk and more volatile, so it has to offer higher returns.

Say you decided to invest $500 each month for a year in 10-year Treasury notes with a 4.25% annual yield. Each month’s $500 investment in Treasury notes would yield $761 exactly 10 years later, assuming the interest payments were reinvested. By the end of the 10th year, you would have invested a total of $6,000 in Treasury notes and have a total of $9,137.

Of course, if you’d prefer to invest in bonds over a longer timeline, you could buy $500 in 30-year Treasury bonds each month for a year. Treasury bonds are currently being offered with a 4.5% interest rate. By the end of the 10th year, you would have over $22,800, assuming you reinvested the interest payments.

Bonds certainly don’t offer the same upside as stocks, they may be more suitable if you’re risk averse or have a condensed timeline and won’t have time to allow your portfolio to recover from potential market losses. Additionally, bonds can offer much higher returns than a simple savings account, which tend to pay below 1% annualized interest on average, while also giving you a strong measure of stability.

Factors to Consider When Investing

When it comes to investment, there are several different factors that determine your returns. Up front, there’s the question of capital, meaning how much money you will invest. In this case, we will assume that to be $500 per month. Beyond that, the two most important issues to consider are:

1. Length of Investment

How long will you be holding these investments? The length of time you invest will determine how long your money has to grow. In the case of regular, structured investments it will also determine how much capital you ultimately put in. For example, an investor who holds their portfolio for 10 years will put $60,000 into it (10 years of investing x 12 months per year x $500 per month), while an investor who holds the same portfolio for 20 years will contribute $120,000 worth of capital.

2. Chosen Assets

The assets you choose will determine how your portfolio performs. This is based on several factors, most importantly your tolerance for risk and your investing goals.

For example, a short-term investor may be simply holding money for a few years while they save up to buy a home. This person will generally want liquid investments with relatively little chance of volatility; they don’t have much time for things to go wrong. However, an investor saving for retirement may have decades ahead of them. They can take riskier positions because they have more time for their portfolio to recover from downturns.

The answers to these questions range widely, so let’s look at a few examples in order to find a general expectation for what you can earn if you’re investing $500. We are going to look at the two most popular ways that many investors consider investing lower amounts of money.

Bottom Line

Making fixed, regular contributions can be one of the best ways to build over time, whether you’re saving up for retirement or just a big trip. For investors with time to ride out the volatility, a stock-heavy approach focused on S&P 500 index funds will give you strong growth. For those who need more security, bonds can give you much higher returns than simple savings accounts while also mitigating many of the market’s risks.

Tips on Investing

If you’re looking at making regular contributions to your portfolio, you might want to consider working with a professional when it comes to asset allocation. A financial advisor can create a portfolio that matches your personal goals and help you maintain them. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
How much will your investment strategy net you? Whether you have $500 to invest each month or even just $15, any amount of money can add up over time. SmartAsset’s investment calculator can help you estimate your investment returns, which in turn may inform your investing strategy.