Becoming a stock market multi-millionaire isn't easy, but it is feasible -- even if you're not an investing expert.
When it comes to building wealth in the market, a long-term outlook is key. You don't need to find that one investment that makes you rich overnight, but you will need the right strategy and a consistent routine. If your goal is to earn $2 million or more in the stock market, here's what it would take.
Choosing the right investments
The returns you earn will vary widely depending on where, exactly, you're investing and how much risk you can tolerate.
For simplicity's sake, let's assume your returns are in line with the stock market's historical average, which is around 10% per year. While you likely won't earn 10% returns every single year, your annual returns should average out to around 10% per year over time.
If you're taking an active approach to investing and buying individual stocks, you may be able to beat the market and earn higher-than-average returns.
However, keep in mind that even with individual stocks, it's still wise to keep a long-term outlook and stick to stocks with the potential for consistent growth. While it may sound counterintuitive, slow-but-steady type investments are often more lucrative over time than high-risk short-term stocks.
Reaching $2 million or more
Time is your most valuable asset when it comes to generating wealth in the stock market. The earlier you get started, the less you'll need to invest each month to see substantial gains.
Say you're earning an average rate of return of around 10% per year, and you want to reach $2 million in savings. Here's approximately what you'd need to invest each month, depending on how many years you have to let your money grow:
| Number of Years | Amount Invested per Month | Total Savings |
|---|---|---|
| 40 | $400 | $2.124 million |
| 35 | $650 | $2.114 million |
| 30 | $1,100 | $2.171 million |
| 25 | $1,800 | $2.123 million |
| 20 | $3,000 | $2.062 million |
Source: Author's calculations via Investor.gov
If you already have some money invested in the stock market, you're off to a head start and may not need to invest as much per month. But in general, the longer you put off investing, the more difficult it will be to reach millionaire status.
Again, keep in mind that the returns you're earning will significantly impact your total gains. Just be careful not to chase investments promising sky-high returns, because they're often too good to be true.
Should you still invest if a recession is looming?
Right now, in particular, can be a tough time to invest, as many investors are worried about the future of the stock market. A recession is looking more likely in 2023, and it can be tempting to wait until after the market stabilizes to invest.
However, now can be a fantastic time to buy if you want to take advantage of the next bull market.
Stock prices can be unpredictable, so nobody can say exactly when the next bull market will begin. But the market is often described as being forward-looking, which means it's generally impacted by economic uncertainty before the economy itself. So if a recession is looming, stock prices will usually fall before the recession actually begins.
That also means, though, that the market will generally recover before the economy. In fact, in nearly every recession over the past 50 years, the S&P 500 has started its rebound before the economy bottomed out. So if you're waiting to invest until the economy regains its strength, you may miss out on the early stages of the next bull market.
Reaching $2 million in the stock market takes hard work and consistency, but it is possible. By investing in the right places and keeping a long-term outlook, you can earn more than you might think.
