Planning to grow your portfolio to $1 million by the time you retire can be a great goal. And while it can seem like a daunting one, it's easier to accomplish that target if you start your investing journey early. Conversely, the later you start, you'd need to invest more to reach the same objective in order to make up for lost time.
With many good exchange-traded funds (ETFs) focused on growth and which can generate strong long-run returns, picking a place to invest your money doesn't have to be difficult, either. Here's a look at how much you will want to aim to invest in the stock market based on your age, and where you may want to invest your money as well.
How to grow your portfolio to $1 million
Determining how much you will need to invest is based on two factors: investing years left and the anticipated average rate of return.
Calculating the number of investing years left is fairly straightforward, since you'd likely have a good idea when you'd want to retire. Your expected rate of return, however, can be much more difficult to predict. The S&P 500, for example, has averaged 10% returns annually in the long run. However, if you are looking for greater average returns, you'd want to outperform that benchmark by investing a greater portion of your investing principal in growth stocks based on your risk appetite. Of course, the trade-off is that you give up some stability while taking on greater risk, which in turn, could expose your portfolio to more volatility than if you had a broader mix of stocks. A good example of that was in 2022, when rising interest rates led to a broad sell-off of growth stocks. In the long run, however, growth stocks should recover, but that may take several years to happen.
Here's a breakdown of how much you would need to invest initially to get to $1 million based on your age (assuming you retire by 65) at various average annual rates of return or growth.
| Age | Investing Years | 10% Growth Rate | 11% Growth Rate | 12% Growth Rate | 13% Growth Rate | 14% Growth Rate | 15% Growth Rate |
|---|---|---|---|---|---|---|---|
| 55 | 10 | $385,543 | $352,184 | $321,973 | $294,588 | $269,744 | $247,185 |
| 50 | 15 | $239,392 | $209,004 | $182,696 | $159,891 | $140,096 | $122,894 |
| 45 | 20 | $148,644 | $124,034 | $103,667 | $86,782 | $72,762 | $61,100 |
| 40 | 25 | $92,296 | $73,608 | $58,823 | $47,102 | $37,790 | $30,378 |
| 35 | 30 | $57,309 | $43,683 | $33,378 | $25,565 | $19,627 | $15,103 |
| 30 | 35 | $35,584 | $25,924 | $18,940 | $13,876 | $10,194 | $7,509 |
Calculations by author.
As the above table suggests, investing in high-performing growth stocks can lead to higher average annual growth rates for your portfolio, reducing the need for a six-figure initial investment, unless you begin investing in your 50s.
An investment that can help you beat the market
If you want to beat the market and outperform the S&P 500, you are going to need to take on some risk, which, in this case, is going to be focusing on growth stocks. But I would go one step further and invest in simply the best of the best -- the Nasdaq-100. A good ETF that gives you exposure to the Nasdaq-100 is the Invesco QQQ Trust (QQQ 1.54%). The fund invests in the 100 largest nonfinancial companies on the Nasdaq. You'll get exposure to top growth stocks such as Costco Wholesale, Microsoft, Amazon, Nvidia, Tesla, and many other well-known stocks.
Over the past decade, the Invesco QQQ Trust has trounced the S&P 500, generating total returns (which include reinvesting dividends) of 425%, versus the broader index's 230% returns, translating into 18% and 12.7% average annual returns, respectively. That's an impressive rate, but investors should be careful not to assume that will always be the case; good years will inevitably balance out with some bad ones in the long haul. Over the last 20 years, the ETF's average annual return drops to 14%, but far outpaces the S&P 500's 9.8%.
However, the bottom line is, as far as growth investments go, it's hard to not like the Invesco QQQ Trust.
Now is always a good time to invest
Regardless of how many investing years you have left, or what your actual returns will turn out to be, it's generally a good idea to remain invested in stocks over the long run. Timing the market, or trying to predict where stocks will go, is near impossible and could leave you missing out on profits along the way.
Investing in a top growth fund such as the Invesco QQQ Trust can be a good place to put any money you can afford to invest. In the long run, you're likely to be far better off for it. While starting your stock investment journey early is ideal, don't let that discourage you if you couldn't. Because as you've seen with the QQQ's amazing returns over the past two decades (that included a global financial crisis in 2008), investing in top growth stocks can lead to incredibly strong profits, regardless of the timing and duration of your investment.
