Investing in the stock market can be intimidating, but it's also one of the most effective ways to build wealth that lasts a lifetime. With the right strategy, you could potentially earn $1 million or more -- even if you're not a stock market guru.
There are two important steps to maximizing your earnings in the market: invest in the right places, and invest consistently for as long as possible. Here's exactly what it takes to reach $1 million or more.
Choosing the right investments
The investments you choose will make or break your portfolio. Invest in the wrong places, and you risk losing more than you gain.
Opting for strong stocks from healthy companies is key to building long-term wealth. These types of companies will have solid underlying business fundamentals, such as good financials, a competent leadership team, and a competitive advantage in the industry.
Stocks with strong fundamentals will often still be affected by short-term market volatility. However, they're also far more likely to recover from downturns and go on to see positive long-term returns. The more of these stocks you have in your portfolio, the safer your money will be.
If you're willing to put in the effort to research stocks, you could potentially earn much higher-than-average returns over time. But not everyone has the time or interest to invest in individual stocks, and that's OK. In that case, an exchange-traded fund (ETF) could be a better fit.
An ETF is an investment that contains dozens or even hundreds of stocks bundled together into a single fund. When you invest in just one ETF, then, you're actually investing in many different stocks at once.
One of the safest and most reliable funds out there is the S&P 500 ETF. This type of investment tracks the S&P 500 index itself, and it contains roughly 500 stocks from the largest and strongest companies in the U.S. If you're looking for a low-effort investment that's almost guaranteed to earn positive returns over time, an S&P 500 ETF could be a good option.
Reaching $1 million or more
How much you'll need to invest each month to reach $1 million depends largely on where you invest and how the market performs, but it will generally take decades to build a substantial amount of wealth.
Again, long-term investments are the safest options. If you're investing in the right places, then, you shouldn't expect to become a millionaire overnight. But by investing a little each month and staying consistent over time, your savings will add up.
The market itself has earned an average rate of return of around 10% per year, meaning the annual highs and lows have averaged out to around 10% per year over decades. If you're investing in individual stocks, you could potentially earn much more than this. But for simplicity's sake, let's assume you're earning 10% average annual returns on your investments.
If you have a goal of reaching $1 million and are earning a 10% average annual return, here's approximately how much you'd need to invest each month depending on how much time you have:
Number of Years
Amount Invested per Month
Total Portfolio Value
20
$1,500
$1.031 million
25
$850
$1.003 million
30
$525
$1.036 million
35
$325
$1.057 million
40
$200
$1.062 million
Data source: Author's calculations via investor.gov.
Time is incredibly valuable when investing, so the earlier you can start, the easier it will be to accumulate $1 million or more. Even if you can't afford to invest hundreds of dollars per month, getting started now can still help maximize your earnings over time.
Earning $1 million in the stock market isn't easy, but it is achievable if you have the right strategy. By choosing the right stocks, investing consistently, and keeping a long-term outlook, you'll be on your way to becoming a stock market millionaire.
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Assuming that you can earn this 10% average return over your investing career, if you are getting started investing this year and you want to become a millionaire in 30 years, you would need to invest $506.60 per month. This amount may seem like a lot, but it may actually be pretty doable for many people.
Assuming that you can earn this 10% average return over your investing career, if you are getting started investing this year and you want to become a millionaire in 30 years, you would need to invest $506.60 per month. This amount may seem like a lot, but it may actually be pretty doable for many people.
If you are starting from scratch, you will need to invest about $4,757 at the end of every month for 10 years. Suppose you already have $100,000. Then you will only need $3,390 at the end of every month to become a millionaire in 10 years.
Suppose you're starting from scratch and have no savings. You'd need to invest around $13,000 per month to save a million dollars in five years, assuming a 7% annual rate of return and 3% inflation rate. For a rate of return of 5%, you'd need to save around $14,700 per month.
The truth is that most investors won't have the money to generate $1,000 per month in dividends; not at first, anyway. Even if you find a market-beating series of investments that average 3% annual yield, you would still need $400,000 in up-front capital to hit your targets. And that's okay.
How much will $100k be worth in 20 years? If you invest $100,000 at an annual interest rate of 6%, at the end of 20 years, your initial investment will amount to a total of $320,714, putting your interest earned over the two decades at $220,714.
The amount of $100,000 will grow to $432,194.24 after 30 years at a 5% annual return. The amount of $100,000 will grow to $1,006,265.69 after 30 years at an 8% annual return. Where, FV = Future value of the amount invested today on maturity.
For example, a 10% average annual rate of return could transform $100,000 into $1 million in approximately 25 years, while an 8% return might require around 30 years.
Doubling money would require investment into individual stocks, options, cryptocurrency, or high-risk projects. Individual stock investments carry greater risk than diversification over a basket of stocks such as a sector or an index fund.
Once you have $1 million in assets, you can look seriously at living entirely off the returns of a portfolio. After all, the S&P 500 alone averages 10% returns per year. Setting aside taxes and down-year investment portfolio management, a $1 million index fund could provide $100,000 annually.
Let's say you want to become a millionaire in five years. If you're starting from scratch, online millionaire calculators (which return a variety of results given the same inputs) estimate that you'll need to save anywhere from $13,000 to $15,500 a month and invest it wisely enough to earn an average of 10% a year.
Some experts recommend withdrawing 4% each year from your retirement accounts. To generate $500 a month, you might need to build your investments to $150,000. Taking out 4% each year would amount to $6,000, which comes to $500 a month.
Historically, the stock market has an average annual rate of return between 10–12%. So if your $1 million is invested in good growth stock mutual funds, that means you could potentially live off of $100,000 to $120,000 each year without ever touching your one-million-dollar goose. But let's be even more conservative.
When making a stock or ETF purchase, funds from your Cash App Balance are used to purchase the stock or ETF. If more funds are needed to cover the remainder of the transaction, they are pulled from your linked debit card to your Cash App Balance.
According to Schwab's 2022 Modern Wealth Survey, the average American thinks being rich means having a net worth of $2.2 million. However, wealth has no universal definition. Just as beauty is in the eye of the beholder, being rich depends on your personal definition and circ*mstances.
Here's How Much to Invest Each Month. Reaching millionaire status isn't easy, but it is achievable -- especially with the right strategy. Investing in the stock market is one of the most effective ways to build wealth, and with enough time and consistency, you could potentially earn well over $1 million.
The key Is Not to Seek Quick Riches but to Embrace a Patient, Informed, and Disciplined Approach. Becoming a Stock Market Millionaire Is Indeed Possible, but It Requires a Combination of Strategic Thinking, Risk Management, and a Long-Term Perspective.
With the right strategy, you could potentially earn $1 million or more -- even if you're not a stock market guru. There are two important steps to maximizing your earnings in the market: invest in the right places, and invest consistently for as long as possible.
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