Hitting the million-dollar mark is a huge financial milestone for most people, but it's almost impossible to achieve by saving alone. Luckily, investing can be your ticket to making it happen without nearly as much trouble.
Nothing is guaranteed in the stock market, but if the Invesco QQQ Trust ETF (QQQ 4.80%) continues on its current path, you could hit the milestone by investing as little as $500 monthly.
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A history of outperforming the market
QQQ mirrors the Nasdaq-100, an index that tracks the 100 largest non-financial companies listed on the Nasdaq stock exchange. Most of the exchange-traded fund (ETF) is made up of tech companies (64%), but it also holds companies from the other nine non-financial major sectors.
Since it hit the market in March 1999, QQQ has averaged close to 10% annual returns, but in the past decade, that average has almost doubled to nearly 20%.
I don't expect consistent 20% annual returns, but for example purposes, let's assume it meets in the middle and averages 15% annual returns. Accounting for QQQ's 0.18% expense ratio, $500 monthly investments could grow to over $1 million in around 24 years. If we go with the more modest 10% average returns, it could happen in around 31 years.
How much your investment grows will vary by time and returns, but the larger point is how much heavy lifting time and consistency can impact building wealth in the stock market. In the two scenarios above, you would've only personally contributed $144,000 in 24 years and $186,000 in 31 years.
In the past decade, QQQ has also averaged a 0.7% dividend yield. It's small, yes, but with $1 million invested in the ETF, it would pay out $7,000 annually at that yield.
NASDAQ: QQQ
Key Data Points
Why QQQ can keep its momentum going
QQQ's long-term success will depend heavily on the success of America's tech sector, especially the "Magnificent Seven" stocks, which account for almost 43% of the ETF. The sector seems a bit overvalued right now, but it's still crucial to the global economy.
Barring some historic catastrophe or unprecedented event, companies like Microsoft, Apple, Alphabet, Amazon, and Meta will be a large part of people's lives for the foreseeable future. Their roles might look different, but you can bet they'll be there.
If I'm investing for the long term, I trust these companies and the blue-chip stocks from other sectors to maintain their success.
