Investing every month is a great habit to get into.
There are many ways to try and cut costs and save money. From canceling unused subscriptions to consolidating debts to spending less money on eating out, cost-cutting moves can potentially give you some room to put money aside and invest. And there's a big incentive to do so: It can help you become a millionaire.
If you can shave off $10 per day in costs, or $300 per month, and regularly invest that into a growth-focused exchange-traded fund (ETF), you can eventually have a portfolio worth more than $1 million. Here's how.
A growth-focused fund will allow you to generate the best long-run returns
You can invest in the S&P 500 to get broad and diverse exposure to the stock market. Over time, your returns will increase at the index's long-term average rate of around 10%. But if you are investing and have decades of years to go, then focusing more on growth stocks can be advantageous to you. While you take on a bit more risk by doing so, you can achieve better returns in the end. While growth stocks may experience volatility and there could be a bad year (like 2022), in the long run they are likely to rise in value and outperform broader and more diverse funds.
One fund that is particularly attractive is the Vanguard Growth Index Fund (VUG 0.54%). As the name suggests, it is a growth-focused fund that targets some of the best stocks in the world. It has a minuscule expense ratio of just 0.04%, which will ensure that fees don't eat up much of your returns. And at close to 200 stocks, there's some excellent diversification there as well. Top stocks such as Microsoft, Apple, and Nvidia make up its top-three holdings and account for close to one-third of the fund.
Over the past 10 years, the Vanguard Growth Index has generated returns of 270%, outperforming the S&P 500, which is up 177% during the same time period. At 270%, the fund's compounded annual growth rate averages out to 14%.
How $300 per month can turn into to $1 million
If you invest $300 each month, that comes out to $3,600 over the course of a full year. And after 30 years of investing, that would total $108,000. But with the power of compounding, your portfolio's value could rise far higher than that.
Assuming you invested $300 every month into the Vanguard Growth Index Fund and it achieved gains of 14% per year on average, then this is how your portfolio's value could grow over the years.
| Year | Balance |
|---|
| 5 | $26,160.22 |
| 10 | $78,627.41 |
| 15 | $183,856.13 |
| 20 | $394,903.88 |
| 25 | $818,183.31 |
| 26 | $944,257.50 |
| 27 | $1,089,159.85 |
| 28 | $1,255,702.22 |
| 29 | $1,447,116.37 |
| 30 | $1,667,116.69 |
Calculations by author.
It would take between 26 and 27 years for your portfolio to hit the $1 million mark. That means if you start investing $300 per month at the age of 39, that could still be enough time to get to $1 million by the time you retire, assuming you do so at the age of 65. If you don't start investing until later in life, you can of course make up for this by investing more money. Either way, it's a fairly simple strategy that any investor can deploy: Put money aside every month, and put it into a diversified growth fund such as the Vanguard Growth Index Fund.
Admittedly, 14% is a high average annual return, and your actual returns and growth rate will undoubtedly vary. However, you'll be giving yourself a great opportunity to profit from growth stocks in the long run by investing in this ETF.
There's never a bad time to invest
Even if the current economic conditions can make it difficult to save money, putting any amount aside into an ETF can be a great move for investors. Getting into the habit of saving and investing every month is a great routine to start. Many brokerages nowadays offer low- or no-cost commissions, making it worthwhile to even invest small amounts of money into ETFs. And in the end, you'll be better off for it by being in a much stronger financial position by the time you retire.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, and Vanguard Index Funds-Vanguard Growth ETF. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
FAQs
It would take between 26 and 27 years for your portfolio to hit the $1 million mark. That means if you start investing $300 per month at the age of 39, that could still be enough time to get to $1 million by the time you retire, assuming you do so at the age of 65.
How much do I need to invest to make a million dollars? ›
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.
What is the safest investment with the highest return? ›
These seven low-risk but potentially high-return investment options can get the job done:
- Money market funds.
- Dividend stocks.
- Bank certificates of deposit.
- Annuities.
- Bond funds.
- High-yield savings accounts.
- 60/40 mix of stocks and bonds.
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.
Where is the safest place to put your retirement money? ›
The safest place to put your retirement funds is in low-risk investments and savings options with guaranteed growth. Low-risk investments and savings options include fixed annuities, savings accounts, CDs, treasury securities, and money market accounts. Of these, fixed annuities usually provide the best interest rates.
What percentage of retirees have $3 million dollars? ›
Specifically, those with over $1 million in retirement accounts are in the top 3% of retirees. The Employee Benefit Research Institute (EBRI) estimates that 3.2% of retirees have over $1 million, and a mere 0.1% have $5 million or more, based on data from the Federal Reserve Survey of Consumer Finances.
How much income do you need to buy a $1000000? ›
Income Necessary for a $1 Million Home (California)
| 3.5% DOWN FHA FINANCING: | $230,000 per year** |
|---|
| 15% DOWN CONVENTIONAL FINANCING: | $200,000 per year** |
| 20% DOWN CONVENTIONAL FINANCING: | $185,000 per year** |
Aug 5, 2022
Here's my list of the 10 best investments for a 10% ROI.
- How to Get 10% Return on Investment: 10 Proven Ways.
- High-End Art (on Masterworks)
- Invest in the Private Credit Market.
- Paying Down High-Interest Loans.
- Stock Market Investing via Index Funds.
- Stock Picking.
- Junk Bonds.
- Buy an Existing Business.
Conventional wisdom holds that when you hit your 70s, you should adjust your investment portfolio so it leans heavily toward low-risk bonds and cash accounts and away from higher-risk stocks and mutual funds. That strategy still has merit, according to many financial advisors.
How to get 10% return on investment? ›
Where can I get 10 percent return on investment?
- Invest in stocks for the short term. ...
- Real estate. ...
- Investing in fine art. ...
- Starting your own business. ...
- Investing in wine. ...
- Peer-to-peer lending. ...
- Invest in REITs. ...
- Invest in gold, silver, and other precious metals.
Those who are able to save a significant amount beyond their retirement account contributions may be able to generate $200 monthly in interest. “If you have $50,000 in a high-yield savings account offering 5% APY, that's $200 a month right there,” Henry says.
How much do I need to invest to make 400 a month? ›
Buy the index or pick individual stocks for passive income
Right now, the average dividend yield on the S&P/TSX 60 Index is around 3.11%. If you just bought the index, you would need to invest $154,340 to earn an average of $400 per month. Fortunately, you can do even better by picking individual stocks.
How much money do I need to invest to make $1000 a month? ›
A stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income, Mircea Iosif wrote on Medium. “For example, at a 4% dividend yield, you would need a portfolio worth $300,000.
At what age should you get out of the stock market? ›
There are no set ages to get into or to get out of the stock market. While older clients may want to reduce their investing risk as they age, this doesn't necessarily mean they should be totally out of the stock market.
How to retire at 62 with little money? ›
If you retire with no money, you'll have to consider ways to create income to pay your living expenses. That might include applying for Social Security retirement benefits, getting a reverse mortgage if you own a home, or starting a side hustle or part-time job to generate a steady paycheck.
Where is the safest place to keep cash at home? ›
Where to safely keep cash at home. Just like any other piece of paper, cash can get lost, wet or burned. Consider buying a fireproof and waterproof safe for your home. It's also useful for storing other valuables in your home such as jewelry and important personal documents.
How long does it take to turn $100 000 into a million? ›
If you keep saving, you can get there even faster. If you invest just $500 per month into the fund on top of the initial $100,000, you'll get there in less than 20 years on average. Adding $1,000 per month will get you to $1 million within 17 years.
How to invest $100 000 to make $1 million? ›
The simplest path from $100,000 to $1 million
The simplest way to invest your money is by using a simple broad-market index fund. An index fund that tracks the S&P 500 or a total stock market index typically has low fees, and it's going to closely match what the overall stock market returns.
How much annual income can $1 million generate? ›
Saving a million dollars is a big achievement, but many Americans fear it won't be enough. One rule of thumb suggests $1 million would generate around $40,000 each year, adjusted upward for inflation. Instead of picking a figure, work out what income you might need in your old age and work backward from there.
How much money do I need to invest to make $5000 a month? ›
To generate $5,000 per month in dividends, you would need a portfolio value of approximately $1 million invested in stocks with an average dividend yield of 5%. For example, Johnson & Johnson stock currently yields 2.7% annually. $1 million invested would generate about $27,000 per year or $2,250 per month.
