Investing in the S&P 500 (^GSPC -1.11%) has historically been a great way for someone to grow their wealth. As a benchmark for the broad market, the index tracks 500 of the largest and most successful U.S. companies.

While you cannot invest directly in the S&P 500, a number of exchange-traded funds (ETFs) track the index at a low cost. And since these ETFs distribute your money across hundreds of stocks, a bet on the S&P 500 can be a lower-risk way to invest in the stock market than picking and choosing individual stocks.

It may not always be possible to put a big lump sum into the stock market. However, if you come into an inheritance or profit from the sale of a home, you may be able to make a sizable investment, even if you haven't accumulated a significant amount of savings.

Below, I'll look at whether investing $50,000 into an S&P 500 index fund can set you up on a path to have $1 million by retirement, a goal many people have in order to live comfortably in their golden years.

The S&P 500 has produced incredible returns over the past decade

Going back nearly a century, the compounded annual return for the S&P 500, including dividends, is 10.1%. But in the past 10 years, the index's return has been an even more impressive 13.7%. While that's great news for investors who have been invested during that time, the outlook for the next decade may not be so rosy.

Goldman Sachs analysts, for example, project the S&P 500 may only generate an average annual return of 3% over the next 10 years due to high valuations and the resulting concentration of value in the index's biggest holdings. JPMorgan analysts believe the index will deliver an annual return of just 6% over the next decade.

Put simply, investing in the index today could mean significantly lower returns than what investors have grown used to in recent history.

^SPX Chart

Data by YCharts.

But for someone starting their career or in the middle of it, investing their retirement savings means thinking beyond the next decade. So, even if the next five or 10 years of returns for the index are relatively weak, the S&P 500 could still make up for those slow years with better returns down the road. There are just too many factors that could weigh on the markets, making it next to impossible to predict exactly what the market will do that many years in the future.

Here's how much a $50,000 investment could become

Instead of trying to guess exactly what the annual returns for the S&P 500 will be over the next decade and beyond, the table below illustrates what a $50,000 investment could be worth under different scenarios.

 

Projected Value of a $50,000 Investment Today
 

Annualized Rate of Return for the S&P 500
Year 3% 6% 8% 10%
10 $67,200 $89,500 $107,900 $129,700
20 $90,300 $160,400 $233,000 $336,400
25 $104,700 $214,600 $342,400 $541,700
30 $121,400 $287,200 $503,100 $872,500
35 $140,700 $384,300 $739,300 $1,405,100
40 $163,100 $514,300 $1,086,200 $2,263,000

Table and calculations by author. Amounts rounded to the nearest hundred.

The reality is that while a $50,000 lump investment may be a significant amount of money, it will still take many years and a solid rate of return to grow to $1 million.

One way to help boost these numbers is by contributing to your holdings over time. Even if you're able to put a large lump sum into the stock market today, periodically adding to your portfolio can be an effective way to help accelerate your gains.

Slow and steady wins the race

You may look at the table above and think it's not worth investing in the S&P 500 if its returns may diminish in the years ahead. Or you may believe you're better off prioritizing other investments like growth stocks. Just remember that the potential for higher returns also means taking on more risk, and not everyone is comfortable with the extra volatility that comes with such an approach.

Meanwhile, a bet on the S&P 500 offers immediate diversification, and its focus on large, high-quality businesses still makes it one of the most reliable ways to invest in the stock market. But even if you have $50,000 to begin your journey, patience is necessary to give your investment the time it needs to grow into a proper nest egg.