The S&P 500 has historically delivered an average annual return of about 10%, making it a popular choice for long-term investors. However, those pursuing financial independence and early retirement (FIRE) often turn to low-cost, broad-market ETFs like Vanguard’s Total Stock Market ETF (VTI) to maximize returns and diversification. While nominal returns may look attractive, it’s important to account for inflation—often around 2-3%—which reduces real returns to closer to 7%. Using CPI data helps investors calculate their real returns, providing a clearer view of actual wealth growth. Additionally, understanding the impact of taxes on investment gains, especially in different states, is crucial for accurate financial planning.
