Saving for the future isn't easy, especially in this economic climate. But retirement is becoming more and more expensive, and a healthy nest egg is key to enjoying your senior years as comfortably as possible.
Fortunately, you don't need to be a stock market expert to retire rich. In fact, with the right strategy, it's possible to retire a millionaire -- even if you're not currently wealthy. Here's how to get started.
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1. Invest consistently
Consistency is the key to generating wealth in the stock market, and investing just a little each month can go a long way toward building a million-dollar nest egg. This also means it's important to continue investing even during periods of market volatility.
When stock prices are down, it can be tempting to press pause on investing until the market stabilizes. However, that will result in missing out on valuable time.
Also, while it may seem counterintuitive, investing during downturns can help you accumulate more money over time. When the market is down, prices are significantly lower. By continuing to invest during these slumps, you can load up on quality investments for a fraction of the cost -- and get far more bang for your buck.
2. Keep a long-term outlook
Building wealth takes time, and depending on how much you can afford to invest each month, it could take several decades to accumulate $1 million or more. But the longer you allow your money to grow, the easier it will be to retire rich.
Say, for example, you want to retire with $1 million, and your investments are earning an average rate of return of around 8% per year (which is just under the S&P 500's historical average). Here's how much you'd need to invest each month, depending on how many years you have to save.
| Number of Years | Amount Saved per Month | Total Savings |
|---|---|---|
| 40 | $325 | $1.010 million |
| 35 | $500 | $1.034 million |
| 30 | $750 | $1.020 million |
| 25 | $1,150 | $1.009 million |
| 20 | $1,875 | $1.030 million |
Source: Author's calculations via Investor.gov.
Thanks to compounding, your savings will grow exponentially over time. It's not always easy to maintain a long-term outlook, but the more time you give your money to accumulate, the more you can potentially earn.
3. Choose the right investments
The investments you choose can make or break your strategy. While it can be tempting to invest in higher-risk stocks with the potential for explosive growth, a safer strategy is to opt for slow-but-steady types of investments.
This isn't to say that these stocks can't experience periods of high growth. But they should also have solid underlying business fundamentals, a strong competitive advantage in the industry, and the potential to see consistent growth over the long term.
These investments won't make you a millionaire overnight. However, you're much less likely to lose money. By investing consistently in the right places and holding those investments for the long term, you can earn more than you might think over time.
