Whether you're new to the stock market or have been investing for years, nearly everyone wants to get rich someday.
While becoming a multimillionaire is a lofty goal, it is possible -- even if you're not already wealthy. Investing in the stock market is one of the easiest and most effective ways to generate wealth over time. You'll need the right strategy, though, and these three moves can put you on the right track.
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1. Choose your investments wisely
The right investments for you will depend on your personal preferences. If you enjoy researching companies and building a highly personalized portfolio, investing in individual stocks may be the way to go. On the other hand, if you'd prefer a hands-off approach, you may be better off with exchange-traded funds.
Once you've nailed down your investing style, it's time to start choosing stocks or funds. Do your research here to make sure you're buying quality investments that are likely to perform well over time.
Blue chip stocks, for example, can be a smart choice if you're buying individual stocks, because these companies have a long track record of experiencing consistent growth. Or if you're buying ETFs, an S&P 500 ETF can be a wise choice. These funds contain hundreds of stocks from large and successful companies, giving your investments a good chance of earning positive returns over time.
2. Start investing as soon as you can
Aside from choosing the right investments, one of the single most important things you can do to build wealth is to start investing now. The amount of time you have to let your money grow will have an enormous impact on your total savings, and waiting too long could be a costly mistake.
If you're off to a late start, that's OK. It's never too late to begin investing. By starting now, you could earn substantially more over time than if you were to wait a year or two.
3. Hold your investments for the long term
Finally, be prepared to hold your investments for as long as possible. It will likely take decades to reach multimillionaire status, but the more time your money has to grow, the more you can potentially earn.
Say, for example, you're just getting started in the stock market, and your investments are earning a 10% average annual rate of return (meaning the returns you earn year after year average out to around 10% over time). Let's also say that you're investing $500 per month. Here's approximately how much you'd have over time:
| Number of Years | Total Savings |
|---|---|
| 10 | $96,000 |
| 20 | $344,000 |
| 30 | $987,000 |
| 40 | $2,656,000 |
Calculations by author via Investor.gov
What if you can't afford to invest $500 per month or wait 40 years for your money to grow? In that case, your goal should just be to save as much as you can for as many years as possible. Even if you can't save $2 million or more, you could still accumulate a substantial amount of money.
Becoming a multimillionaire in the stock market is possible as long as you have the right strategy. By choosing the right investments and keeping your money invested for as long as possible, you can earn more than you may think.
