What if the best side hustle wasn't about delivering food, taking surveys, or learning a new skill? What if it required almost no time, ran on autopilot, and had the potential to make you wealthy over the long term?
Welcome to the world of passive investing—specifically, consistently buying into an S&P 500 index fund. While traditional side hustles trade your active time for immediate cash, this strategy lets your money do the heavy lifting, creating a truly passive income stream that grows while you sleep (by the way, active income is not a bad thing! If you're looking for a side hustle, you can always choose one from our vetted directory on the home page!).
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S&P 500 vs. Traditional Side Hustles: A Quick Comparison
Some side hustles are excellent for generating immediate income. But they require one thing you can't get back: your time.
- Active Side Hustle: You work for an hour, you get paid for an hour. If you stop working, the money stops.
- S&P 500 'Side Hustle': You invest your money. It works for you 24/7 through market growth and dividends, and its earning power compounds over time.
The ultimate financial strategy is to use the cash from your active side hustles to fund the one that builds real, long-term wealth.
What is the S&P 500 Index Fund?
The S&P 500 is an index that tracks the performance of 500 of the largest, most profitable public companies in the United States (think Apple, Microsoft, Amazon). An S&P 500 index fund is a type of investment that holds stocks in all of those companies.
By investing in one, you aren't betting on a single company to succeed. You're making a broad, diversified bet on the continued growth of the American economy as a whole. Historically, this has been one of the most reliable ways to build wealth, with the S&P 500 delivering an average annual return of about 10% over the long run.
The Real Magic: How Compounding Creates True Passive Income
The power of this "side hustle" lies in compound growth. This is where the returns your investment earns start generating their own returns.
Let's break it down. Imagine you start by investing $5,000 and then add just $200 every month:
- Year 1: Your money earns a return.
- Year 2: You earn a return on your original investment, your new contributions, and the return from Year 1.
- Year 10: This effect starts to snowball.
- Year 30: Assuming the historical 10% average return, your account could be worth over $480,000. You only contributed $77,000 of your own money. Over $400,000 of that is pure growth.
This is the definition of your money working for you. It's a wealth-generating machine that you simply have to set up and fund consistently.
To put a realistic, and not so "far-out" example:
Investing $500 every month (with a start of $1,000) into the S&P 500 10 years ago (in 2015) would leave you with $150,000 today. Not too bad considering you basically did nothing!
How to Start Your S&P 500 "Side Hustle" in 3 Simple Steps
- Open a Brokerage Account: Choose a reputable, low-cost brokerage firm like Fidelity, Vanguard, or Charles Schwab. Opening an account is free and takes minutes.
- Choose Your Fund (Our Pick: VOO): You'll want to buy an Exchange-Traded Fund (ETF) that tracks the S&P 500. ETFs are great because they trade like stocks and have very low fees. Our top recommendation is the Vanguard S&P 500 ETF (ticker symbol: VOO). It's one of the largest and most popular ETFs in the world, and it's known for its incredibly low expense ratio (0.03%), meaning more of your money stays invested and working for you. Other popular options include IVV and SPY.
- Automate Your Investments: This is the most crucial step. Set up an automatic transfer of a fixed amount of money from your bank account to your brokerage account every month to buy shares. This strategy is called Dollar-Cost Averaging, and it ensures you're investing consistently, regardless of what the market is doing.
The Ultimate Financial Loop
Side hustles are the engine for cash flow. Investing is the engine for wealth. By using the money you earn from your active hustles to consistently invest in the S&P 500, you create a powerful financial loop that can lead to true financial freedom.
For ideas on how to earn extra money to fuel your investments, check out the vetted opportunities on our homepage.
Disclaimer: This article is for informational purposes only and is not financial advice. Past performance is not indicative of future results. All investments involve risk.