Investing doesn’t have to be complicated—you don’t need to pick the perfect stocks or time the market. Honestly, just focus on three simple things: keep fees low, stay broadly diversified, and stick to your plan.
To prove it, here’s an example: a low-cost S&P 500 exchange-traded fund (ETF) that, historically, could have turned a $20,000 Tax-Free Savings Account (TFSA) investment into $81,967 with minimal effort. Let’s take a closer look.
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The ETF in question
The exchange-traded fund (ETF) I’m referring to is BMO S&P 500 Index ETF (TSX:ZSP). It’s one of the best ways for Canadian investors to gain exposure to the U.S. market without over-complicating things.
Here’s how it works: ZSP tracks the S&P 500 Index, which is made up of 500 large-cap U.S. companies. These companies are carefully selected by a committee based on size, liquidity, and earnings quality. The index spans all 11 sectors of the economy, giving you a balanced mix of industries.
ZSP uses a market-cap weighting methodology, meaning the largest companies in the index get the highest allocations. This structure allows you to ride the growth of America’s biggest and most successful corporations while still benefiting from diversification.
What makes ZSP even more appealing is its low cost. The management expense ratio (MER) is just 0.09%, meaning for every $10,000 you invest, you’ll pay only $9 annually in fees.
Combine that with its simplicity and historical performance, and you have an ETF that does exactly what it promises: deliver the long-term growth of the S&P 500 at a fraction of the cost of most actively managed mutual funds.
How to quadruple your money
A historical backtest shows that an investor who purchased $20,000 worth of ZSP at the start of January 2015 and held until the end of December 2024 would have achieved an annualized return of 15.15%, growing their investment to $81,967. That’s a fourfold increase in just a decade!
However, achieving this success required discipline and consistency. First, the investor had to reinvest all of ZSP’s quarterly dividends, allowing the power of compounding to take over. More importantly, they had to stay the course and resist the urge to sell during volatile periods.
And there were plenty of moments where selling might have been tempting. For example, ZSP’s value swung up or down by an average of 12.82% annually. During the COVID-19 crash, ZSP plummeted as much as -18.55% in value before recovering. Staying invested through these ups and downs was the key to achieving long-term success.
