Reaching millionaire status isn't easy, but it is achievable -- especially with the right strategy. Investing in the stock market is one of the most effective ways to build wealth, and with enough time and consistency, you could potentially earn well over $1 million.
Exactly how much you'll need to invest each month depends on your timeline. Compound earnings help your savings grow faster the more time they have to accumulate, so the sooner you get started investing, the easier it will be to earn $1 million. Here's what it might take to reach that goal.
The first step: Choosing the right investments
The specific investments you choose will have an enormous impact on your earnings, so it's important to invest wisely.
Short-term investments often make a lot of promises to make you rich overnight but they're incredibly risky, and investors often lose more than they gain. You're better off, then, opting for long-term investments. These types of stocks or funds may not experience explosive gains but are more likely to see consistent growth over time while limiting your risk.
There are endless investments to choose from, but if you're a beginner or looking for a no-fuss option, an S&P 500 ETF may be a good fit.
This type of fund tracks the S&P 500 index itself, and each ETF includes stocks from 500 of the largest and strongest companies in the U.S. These range from tech giants like Apple and Amazon to household names like Coca-Cola and Procter & Gamble.
When you invest in just one ETF, you'll instantly own a stake in all of these stocks. That diversification can substantially limit your risk. Also, because the companies within the S&P 500 are some of the strongest in the world, they're far more likely to survive market downturns and experience long-term growth.
The path to becoming a millionaire
Again, the exact returns you'll earn by investing will depend on the specific investments you choose. Historically, though, the S&P 500 has earned an average annual return of around 10% per year. While you likely won't see 10% returns each and every year, the annual highs and lows should average out to around 10% per year over decades.
If you're earning a 10% average annual return, here's approximately what you'd need to invest each month to reach $1 million, depending on how many years you have to save:
| Number of Years | Amount Invested per Month | Total Savings |
|---|---|---|
| 20 | $1,500 | $1.031 million |
| 25 | $900 | $1.062 million |
| 30 | $525 | $1.036 million |
| 35 | $325 | $1.057 million |
| 40 | $200 | $1.062 million |
Data source: Author's calculations via Investor.gov.
The more time you have to save, the less you'll need to invest each month to reach $1 million or more. Even if you can't afford to invest much now, it's better to start anyway than put it off.
Also, keep in mind that these calculations assume you're earning returns in line with the market's historical average. If you're willing to put in a bit more work, you could potentially earn far more by investing in individual stocks.
Individual stocks require more research and effort than an ETF, but if you invest wisely, you're also more likely to beat the market. Earning even slightly higher-than-average returns can supercharge your savings over time, meaning you'll need to invest less per month to accumulate at least $1 million.
There's not necessarily a right or wrong way to invest, but regardless of whether you choose an ETF or individual stocks, time is your most valuable resource. By getting started investing now, you'll be on your way to becoming a stock market millionaire.
