Answer:

The simplest answer is No, and here’s why:

1. You can’t invest directly in the S&P 500: The S&P 500 is an index, not a financial instrument. You can't buy "shares" of the index itself.

2. No interest on stocks: Even if you could invest directly, the S&P 500 doesn't pay interest. Stocks don't pay interest to shareholders; they may pay dividends, but that's a different concept.

Now, if we restate the question: Can you invest $1M in an ETF like SPY (which mirrors the S&P 500) and live off the dividends? The answer is a qualified YES—but with some important caveats:

📊 Historical Perspective:

Let’s consider SPY, an ETF that tracks the S&P 500. If you bought $1M of SPY back in June 1994, it would have been 34,235 shares at $29.21. The dividend back then was $0.75 per share, paying you $25,676 annually, or 2.5% of your investment. Adjusted for inflation, that’s roughly $43,906 in today’s dollars.

📈 Growth Over Time:

Fast forward to 2004: the dividend was $1.28 per share, yielding 4.4% on your original $1M investment, equating to $43,821 annually, with your shares worth approximately $2.9M.

📅 Recent Years:

By June 2014, the dividend rose to $3.25 per share, now providing an 11.1% yield on your initial investment—$111,264 per year, with your shares valued at $6.1M. By 2019, the dividend payout was $5.07 per share, yielding 17.4% on your $1M, or $173,571 annually, with your shares worth nearly $10M.

🔄 The Reality Check:

In the early years, living off dividends alone might be challenging, especially with today’s lower starting yield of around 1.39%. However, over time, as dividends increase and your investment grows, a combination of dividend income and a minor drawdown on your principal could allow you to live comfortably while also seeing your investment appreciate significantly.

📉 A Note on SPYD:

There’s an S&P 500 fund called SPYD, designed to deliver higher dividends (about 4.71% pa) but with slower price growth compared to SPY. While SPYD might give you higher dividends in the first few years, the overall growth of your investment would lag behind SPY. Therefore, a strategy of investing in SPY and selectively tapping the principal to match SPYD's higher initial payouts could ultimately yield better long-term results.

Conclusion:

So, while it’s true that simply living off the dividends might be difficult initially, a balanced approach that combines dividends with a calculated draw on the principal can indeed make it possible to live off a $1M investment in SPY while also benefiting from substantial growth in your portfolio over time.