Reaching millionaire status isn't easy, but it is possible -- even if you're not currently wealthy.
Investing in the stock market can be a fantastic tool to build wealth, and you don't need to be an expert to get started. There are some investments that require very little effort on your part to generate substantial returns, and with the right strategy, you could earn $1 million or more by retirement age.
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Getting the most bang for your buck
There are plenty of investment strategies out there, and the right one for you will depend on your personal preferences. If you enjoy researching companies and building a personalized portfolio, for example, investing in individual stocks may be your best option.
On the other hand, if you prefer a more hands-off investment that does most of the work for you, S&P 500 ETFs could be a good fit.
An S&P 500 ETF is a fund that includes the same stocks as the S&P 500 index itself, and it aims to mirror the index's performance over time. With this type of investment, you never need to worry about choosing individual stocks or researching companies. All you have to do is invest as much as you can afford each month, and the fund will take care of the rest.
S&P 500 ETFs can also be a smart investment if you're concerned about stock market volatility. While all investments are subject to short-term downturns, the S&P 500 itself has a decades-long history of recovering from even the worst crashes. No matter what the market does, then, it's extremely likely your investments will bounce back.
Reaching $1 million with S&P 500 ETFs
Despite being a relatively safe investment, S&P 500 ETFs can still earn you a substantial amount of money.
Historically, the S&P 500 has earned an average annual return of around 10% per year. Some years, it experiences much higher returns than that. Others, it sees lower returns or even losses. Over time, though, those highs and lows average out to around 10% per year.
Say you're investing in an S&P 500 ETF and are earning a 10% average annual return. If you were to invest $325 per month, you'd end up with around $1.057 million after 35 years.
It's possible to earn much more than that, though, if you're able to increase the amount you're investing each month. Here's approximately how much you could earn over time, depending on your monthly contributions.
| Amount Invested Each Month | Total Savings After 35 Years, Assuming a 10% Average Annual Return |
|---|---|
| $325 | $1.057 million |
| $350 | $1.138 million |
| $400 | $1.301 million |
| $500 | $1.626 million |
| $600 | $1.951 million |
| $700 | $2.277 million |
Data source: calculations by author via Investor.gov.
Not everyone can afford to invest $700 per month, and that's OK. But if you're able to increase your savings by even $25 or $100 per month, that could amount to hundreds of thousands of dollars more by retirement age.
Retiring a millionaire isn't easy, but it's also not as difficult as it might seem. By investing in the right places, contributing at least a little each month, and staying focused on the long term, you'll be on your way to building a million-dollar nest egg.
