Investing in the stock market is one of the most effective ways to build wealth, and it's even possible to reach millionaire status.
While you don't need to be wealthy to become a stock market millionaire, you do need the right investments. Your portfolio can make or break your earnings potential, so choosing the right stocks is key.
Fortunately, it's easier than you might think to build a million-dollar portfolio. With this one investment, you could potentially save $1 million or more with next to no effort on your part.
Image source: Getty Images.
Investing in the right places
Whether you're new to the stock market or simply prefer a low-maintenance investing approach, one of your best options is an S&P 500 exchange-traded fund (ETF). This type of investment follows the S&P 500 index as a whole, aiming to replicate its performance.
In other words, when you invest in an S&P 500 ETF, you instantly own stock in 500 of the largest and strongest companies in the U.S.
Because this fund only includes stocks from the most successful organizations, that gives your investments a good chance of growing over time. Of course, all stocks can be subject to short-term downturns. But stronger companies are more likely to survive volatility, and when you have hundreds of those stocks in your portfolio, an S&P 500 ETF is almost guaranteed to eventually bounce back from market downturns.
Becoming a millionaire
The stock market is constantly fluctuating, so your annual returns will vary from year to year. Over the long term, however, you're more likely to see consistent growth.
Historically, the S&P 500 has earned an average rate of return of around 10% per year. Some years you'll see much higher returns than that, while in other years you could see below-average returns or even losses. But over time, those highs and lows should average out to roughly 10% per year.
If you're earning a 10% average annual return, investing just over $500 per month would make you a millionaire within 30 years.
What if you can't afford to invest $500 per month, though? That's OK. The longer you leave your money invested, the less you'll need to save each month. Conversely, the more you invest each month, the more you can earn in a shorter amount of time.
| Number of Years | Amount Invested per Month (Earning a 10% Average Annual Return) | Total Savings |
|---|---|---|
| 40 | $200 | $1.062 million |
| 30 | $515 | $1.017 million |
| 20 | $1,500 | $1.031 million |
Data source: Author's calculations via Investor.gov.
Keep in mind, too, that S&P 500 ETFs are low-maintenance investments that require zero effort on your part. You never need to research individual stocks or decide when to buy or sell. All you have to do is invest as much as you can afford each month, then sit back and wait for your money to grow.
Becoming a stock market millionaire isn't easy, but it is possible. By taking advantage of the right investments and keeping a long-term outlook, you can earn more than you might think.
