Investing in the stock market is one of the most effective ways to build long-term wealth, and you don't need to have a lot of money to get started.
What you will need, though, is the right strategy and a little patience. Compound earnings help your money grow faster the more time they have to accumulate. With enough time, even small amounts can build into significant savings.
So just how far can $1,000 go in the stock market? It depends on where you invest and how much time you have.
Choosing your investments wisely
The returns you earn on your investments will vary widely, depending on where, exactly, you invest.
A broad-market fund, such as an S&P 500 index fund or ETF, is a lower-risk option that requires very little effort on your part. These types of funds track the S&P 500 itself and aim to mirror its long-term performance. You never need to worry about researching companies or choosing stocks -- simply invest whatever you can afford, and then wait for your money to grow.
The downside to this type of investment, though, is that it can only earn average returns. If you're looking to beat the market, your best option may be to invest in individual stocks. This approach requires more time and effort, but you could earn far more over time.
Regardless of where you buy, make sure you're keeping a long-term outlook. Short-term investments that promise to make you rich overnight are incredibly risky, and you're likely to lose more than you'll gain.
How far will $1,000 go in the stock market?
Historically, the market itself has earned an average rate of return of around 10% per year. This means that while you likely won't earn 10% returns year after year, the annual highs and lows should average out to roughly 10% per year over decades.
If you were to invest $1,000 right now while earning a 10% average annual return, here's approximately how much you'd accumulate over time, depending on how many years you allow your money to grow:
| Number of Years | Total Savings |
|---|---|
| 10 | $2,600 |
| 20 | $6,700 |
| 30 | $17,400 |
| 40 | $45,300 |
Data source: Investor.gov. Calculations by author.
Keep in mind that these figures assume you're not making any additional contributions. You're simply investing $1,000 and then letting that money sit for decades.
If you were to invest a little each month, though, you could earn exponentially more. For example, say you invest $1,000 now, but then you also invest an additional $100 per month. Assuming you're still earning a 10% average annual return, here's roughly how much you'd have over time:
| Number of Years | Total Savings |
|---|---|
| 10 | $22,000 |
| 20 | $75,000 |
| 30 | $215,000 |
| 40 | $576,000 |
Data source: Investor.gov. Calculations by author.
If you can swing it, investing a little each month could go much further than only making one initial investment.
Building wealth in the stock market
Investing can be intimidating at times, especially during periods of volatility. But getting started early is key. The more time you have to let your money grow, the less you'll need to invest each month to build a robust portfolio.
If you're looking for a low-maintenance way to generate wealth, investing consistently in an S&P 500 index fund or ETF may be a smart option. But if you're willing to put in a little more work for the chance at earning higher average returns, individual stocks could be a good fit for you.
Regardless of where you invest, be sure you're keeping a long-term outlook and opting for stocks or funds with solid fundamentals. This will ensure you're keeping your money as safe as possible while still maximizing your earnings over time.
