Bottom line up front: yes, investing in the Vanguard S&P 500 Index ETF (TSX:VFV) could make you a millionaire. S&P 500 exposure for a 0.09% MER is hard to beat.
But the other half of that equation is behavioural. VFV only works as a wealth-building machine if you follow some surprisingly hard-to-stick-to steps. From January 29, 1993 to August 14, 2025, $10,000 invested in the S&P 500 compounded at 10.6% annually to $1,513,094.25, but only if you did the following.
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Keep it in a tax-sheltered account
Those $1.5 million results are before taxes, so to get as close as possible to that number in real life, you need to shield your gains from the Canada Revenue Agency.
For most Canadians, the Tax-Free Savings Account (TFSA) is the ideal home for VFV. Contributions grow tax-free and withdrawals don’t count as income, meaning you keep every dollar of your capital gains and dividends. The Registered Retirement Savings Plan (RRSP) can also work, but keep in mind that withdrawals will be taxed as income later.
Holding VFV in a non-registered account is the least efficient option because you’ll be taxed on both capital gains and dividends every year, cutting into your compounding.
Keep contributing
The $10,000 investment is the starting point. The real magic comes from adding new money consistently. If you put in an additional $500 every month, that’s $6,000 a year, still under the current $7,000 annual TFSA limit.
Over decades, those steady contributions do the heavy lifting, turning what could have been a modest portfolio into seven figures. Most people underestimate how much small, regular investments add up.
Even without picking winning stocks, the combination of market returns and consistent contributions can be enough to hit millionaire status over a long enough time horizon.
Reinvest your dividends
VFV holds all 500 companies in the S&P 500, many of which pay dividends. Those cash payouts may seem small at first, but reinvesting them creates a snowball effect. Dividends buy more shares, which in turn produce more dividends, which buy even more shares.
Skip the reinvestment, and you miss out on a significant chunk of total returns. Over the past three decades, dividends have accounted for roughly a third of the S&P 500’s total return. Reinvesting them is non-negotiable if you want to give compounding its full effect.
Hold through the volatility
None of the above matters if you panic and sell during market downturns. Over the period in question, the S&P 500’s annualized volatility was around 18.7%, meaning swings of 15% to 20% in a year are normal. In 2008, the index suffered a 55.2% peak-to-trough drawdown.
If you bailed out at the bottom, you locked in losses and missed the recovery. To turn $10,000 into $1.5 million, you had to stay invested through dot-com crashes, the global financial crisis, COVID-19, and dozens of smaller corrections along the way.
The Foolish takeaway
Becoming a millionaire with VFV is less about the fund itself and more about the discipline to follow the plan for decades. Keep it tax-sheltered, keep contributing, reinvest your dividends, and ride out the downturns without flinching. Do that, and you give yourself a realistic shot at turning an average income into generational wealth, with no stock picking or market timing required.
