Investing in the top stocks on the Nasdaq exchange can be a great way to grow your portfolio in the long run. Many of the best growth stocks in the world are on that exchange, and it can be a great place to find a top company to invest in.
An easy way to track the top stocks on the Nasdaq is through the Nasdaq-100 index, which is a list of the top 100 non-financial stocks on the exchange. You can gain exposure to this index via an exchange-traded fund (ETF), such as the Invesco QQQ Trust (QQQ +0.81%), which is a popular option for growth investors.
But just how much would you need to invest in the ETF to grow your portfolio to $1 million or more by the time you retire? Let's find out.
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The biggest question mark is what growth rate the ETF will end up averaging
For the most part, you can control how much you invest into the stock market and how long you remain invested for. But the biggest variable, your expected annual return, will have a huge impact on your portfolio's overall performance, and it's the toughest to predict.
Over the past 10 years, the Invesco ETF has generated total returns (which include dividends) of more than 470%, which is far better than the S&P 500 and its total returns of 282% over that stretch. The Invesco's returns average out to a compounded annual growth rate of 19%. This is effectively the average annual return over that time frame.
The temptation may be to assume that's the return you can expect over the long term. But the ETF has been performing exceptionally well due to the recent growth in artificial intelligence (AI). Expecting these kinds of impressive returns to hold up for decades would be a phenomenal scenario, but it may not be all that probable given that slowdowns, corrections, and crashes are bound to happen. Consider that for decades, the S&P 500's average annual return is only around 10%.
While you might be compelled to think that the Nasdaq-100 should do better than the S&P 500, expecting a return of around 19% could result in making rosy projections and forecasts that may only lead to disappointment later on; a healthy dose of conservatism is more than justifiable in this situation. There's no right or wrong number to choose, but the key should be to set expectations that don't depend on ideal circumstances or variables, which may not be highly probable.
How much would you need to invest today to get to $1 million?
For this example, I'm not going to try and predict a rate of return for the Invesco fund but instead produce a table that will factor in varying returns. This way, you can see how broadly the amounts may vary depending on not only how many years you have until retirement but also on the average return.
| Years to Retire | 9% Growth | 10% Growth | 11% Growth | 12% Growth | 13% Growth | 14% Growth |
|---|---|---|---|---|---|---|
| 10 | $422,411 | $385,543 | $352,184 | $321,973 | $294,588 | $269,744 |
| 15 | $274,538 | $239,392 | $209,004 | $182,696 | $159,891 | $140,096 |
| 20 | $178,431 | $148,644 | $124,034 | $103,667 | $86,782 | $72,762 |
| 25 | $115,968 | $92,296 | $73,608 | $58,823 | $47,102 | $37,790 |
| 30 | $75,371 | $57,309 | $43,683 | $33,378 | $25,565 | $19,627 |
| 35 | $48,986 | $35,584 | $25,924 | $18,940 | $13,876 | $10,194 |
Table and calculations by author.
Based on the estimated number of years you have to retirement, you can see how much you would need to invest in order to get to $1 million by the time you retire. The table serves as more of a guide than a definitive guarantee as to how much you need to set aside today. There are, after all, never any guarantees when it comes to investing.
NASDAQ: QQQ
Key Data Points
The amounts can undoubtedly be high for people who are nearing retirement. But this also assumes that you just invest a lump sum amount today and let the investment grow in value. You can, however, add to your position over time to boost your overall returns. And regardless of whether you get to $1 million or not, investing in the top growth stocks via the Invesco fund can still be an excellent way to grow your portfolio's value in the long run.
