Investing Less Than $200 Per Month in This ETF Could Create $10,000 in Annual Dividend Income Within 25 Years

Setting aside money each month to put into the stock market isn't easy amid rising costs, but the payoff could make it all the more worthwhile. Imagine if you could generate an extra $10,000 per year just in dividend income in the future. You could use that money toward a vacation or to help fund a large purchase.

If you can find a way to set aside close to $200 per month and invest that into the stock market, you can be on a path to achieving that kind of dividend income in 25 years. The best part of all is that you don't have to take on any significant risk, either.

Invest in the market every month, and forget about it

The best investing strategies are often the simplest ones. Put money into the same stock or exchange-traded fund (ETF) every month, and you're done. Don't track charts, look at trends, or worry about stock-related news. All that can complicate the process and turn people off from investing, by implying that the process has to be complicated. It doesn't need to be.

Through ETFs , the process is even simpler. The SPDR S&P 500 ETF Trust (NYSEMKT: SPY) tracks the S&P 500 , a collection of the best stocks on the market. You don't have to worry about which stocks are doing well and which ones are struggling. You'll always have exposure to the best of the best.

How investing in the S&P 500 can generate a portfolio worth over $250,000

Historically, the S&P 500 has averaged a long-run annual return of approximately 9.7% . If you were to invest $200 per month, every month, for 25 years, then your portfolio could be worth around $252,000, assuming the S&P 500 continues to generate those types of gains in the future. That's a solid return on your money, given that those contributions over the years would total only $60,000. Through the effects of compounding and investing on a recurring basis, you can accumulate significantly more wealth than if you simply saved that money and just put it into a checking or savings account each month.

With such a significant amount of savings to work with, you can then put that money to work generating dividend income for you. This is where a dividend-focused ETF can be appropriate. A good ETF for this purpose is the SPDR Portfolio S&P 500 High Dividend ETF (NYSEMKT: SPYD) . It invests in many high-yielding stocks from a range of different sectors, including real estate, financial services, utilities, and many others. And with no one stock accounting for even 2% of its net assets, you don't have to worry about relying too heavily on any individual dividend stock -- there's good diversification with the fund.

While its yield may change, today, the fund is paying investors around 4.6%. At that high a rate, you could expect to collect around $11,600 in dividends per year based on a $252,000 investment. Ultimately, as long as you find a safe dividend ETF that pays at least 4%, that will be sufficient to do the job and convert a $250,000 portfolio into $10,000 in annual dividends. The higher the yield, the less you would need to theoretically save. However, by investing $200 per month, you can give yourself a good round figure to aim for.

Keeping your strategy simple can be the key to making it successful

There's no shortage of complex trading and investing strategies out there if you look for them. But simply buying and holding an ETF can be a way to effectively grow your portfolio's value and set you up for collecting some significant dividend income in the future. While it may not be easy to save and invest money due to today's current challenging economic conditions, there's plenty of incentive to try to do so.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .