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Image source: Getty Images<\/p>\n
Investing in the S&P 500 has provided exceptional returns for investors over the long term. And even in the last five years, vast sums of wealth have been created, thanks in large part to the \u2018Magnificent Seven\u2019 stocks.<\/p>\n
In fact, anyone who put \u00a31,000 to work in a passive index tracker five years ago has now more than doubled their money with around \u00a32,085. And for stock pickers who exclusively invested in Nvidia, that initial \u00a31,000 is today worth a staggering \u00a313,407!<\/p>\n
Of course, the question now becomes, can the largest US stocks continue delivering such phenomenal gains moving forward? And just how much money could a 50-year-old investor expect to make before retirement comes knocking at 67?<\/p>\n
Setting realistic expectations<\/p>\n
A 108% total return from the S&P 500 over the last five years is pretty exceptional. After all, that translates into an average annualised return of 15.8% a year compared to the usual 10% that the US stock market<\/a> generates.<\/p>\n Is this likely to last? Sadly, most likely not.<\/p>\n The last five years have been pretty extraordinary, with the US economy receiving unprecedented stimulus in 2020, a rapid post-pandemic recovery in 2021, and continued business outperformance from tech giants like Nvidia in the years since.<\/p>\n Such events are pretty rare. And while we have seen periods of massive outperformance from the S&P 500 in the past, these have always been followed by an eventual reversion to the longer-term average of 10%.<\/p>\n EventBoom Years5 Year Average Annualised S&P 500 ReturnSlump YearsMarket DrawdownDotcom Bubble1995 \u2013 200022%2000 \u2013 200240%Financial Crisis2003 \u2013 200714%2008 \u2013 200957%Post-Pandemic Boom2020 \u2013 202516%Time will tellTime will tell<\/p>\n The good news is, 10% is more than enough to build up impressive retirement wealth even when starting from scratch at the age of 50 with only \u00a3500 a month to spare. And by letting compounding work its magic<\/a> for 17 consistent years, a brand new portfolio could go on to reach \u00a3266,132.<\/p>\n Maximising wealth<\/p>\n Having an extra quarter-million for retirement is definitely helpful. But for successful stock pickers, even more wealth could be unlocked. And even if a portfolio only generates an extra 3% above average, that\u2019s enough to add roughly another \u00a3100,000 to a pension pot.<\/p>\n