The Motley Fool·2025-12-29 09:12Core Insights - A young adult with a median income can build a substantial investment portfolio through a disciplined saving strategy, with the median annual income for full-time workers aged 25 to 34 being approximately $60,000 as of September 2025, translating to about $45,500 after taxes [1] - Financial advisors recommend saving 20% of after-tax income for retirement, which amounts to $9,100 annually or $758 monthly for the median worker in this age group [1] Investment Strategy - Investing $375 monthly in the Vanguard S&P 500 ETF could grow to $798,600 over 30 years, generating $13,500 in annual dividend income [2][9] - The S&P 500 has achieved a total return of 1,860% over the last three decades, averaging 10.4% annually despite experiencing four bear markets and three recessions [8] Vanguard S&P 500 ETF Overview - The Vanguard S&P 500 ETF tracks the S&P 500 index, which includes 500 large U.S. stocks, covering about 80% of domestic equities and 40% of global equities by market capitalization [4] - The ETF has an expense ratio of 0.03%, significantly lower than the average expense ratio of 0.34% for U.S. index funds and mutual funds [4] Performance and Holdings - The five largest holdings in the Vanguard S&P 500 ETF are Nvidia (7.3%), Apple (7%), Microsoft (6.2%), Alphabet (5.7%), and Amazon (3.8%) [6] - The S&P 500 has outperformed most other asset classes over the last 20 years, with less than 12% of large-cap funds beating the index over the past 15 years [6] Future Projections - If the S&P 500 continues to return 8.4% annually (excluding dividends), a portfolio worth $798,600 could grow to $1.3 million in another five years, yielding $22,100 in annual dividend income [10]