Here's How Investing $300 per Month in a Rock-Solid ETF Can Create $1 Million by Retirement

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 1.34%). 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.

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.