Investing small amounts of money on a recurring basis can be as effective as putting in a large lump sum at once. It also has the added benefit of getting people used to saving and investing regularly, which can create good habits and reduce risk by spreading investments over time.
By saving and investing an average of $15 per day, an investor could build a portfolio worth over $1 million after 30 years. Here's how.
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Investing in a top growth fund can enable investors to grow their portfolio steadily while keeping risk low
Having a go-to exchange-traded fund (ETF) to invest in regularly can be extremely valuable for investors, as it simplifies the decision-making process about where to invest each day, week, or month. A great option to consider is the Vanguard Morningstar Growth ETF (VUG +0.81%), which, as its name suggests, focuses on top growth stocks. These are the types of investments that can generate significant returns over a long time frame. It includes big names such as Nvidia, Apple, Microsoft, and many other top stocks. They will carry some risk, but over a long time frame, they can potentially outperform the broader market.
Over the past decade, this ETF has generated total returns (including reinvested dividends) of approximately 406%, versus about 315% for an index tracking the S&P 500. That may not always be the case, but growth stocks are popular for their potential to deliver outsize returns, which is why the Vanguard Growth ETF can be a compelling long-term option and a go-to fund to invest in regularly.
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Key Data Points
The path to a $1 million portfolio
Saving and investing an average of $15 per day equates to roughly $450 per month. Investments don't need to be made every day, as that would be cumbersome and wouldn't yield significantly greater returns. Saving that money and investing it once a month would suffice. Here's how a $450-per-month investment would grow over the long term, at varying rates:
| Year | 9% Growth | 10% Growth | 11% Growth |
|---|---|---|---|
| 5 | $34,195 | $35,137 | $36,111 |
| 10 | $87,735 | $92,948 | $98,544 |
| 15 | $171,560 | $188,066 | $206,486 |
| 20 | $302,803 | $344,564 | $393,108 |
| 25 | $508,289 | $602,051 | $715,762 |
| 30 | $830,013 | $1,025,696 | $1,273,603 |
Table and calculations by author.
The balance will inevitably depend on what the average annual return ends up being, as the above table shows. But if the Vanguard ETF achieves a 10% return, which would put it in line with the S&P 500's long-term average, then after 30 years of investing $450 each month, the portfolio could surpass a $1 million balance.
