Creating a million-dollar portfolio may not be easy, but for investors who can afford to save and invest $450 per month over the long haul, it is certainly a possibility. By putting that amount of money each month into a safe exchange-traded fund (ETF) that tracks the market, and that incurs low fees, investors can put themselves on track to building up a portfolio worth at least $1 million in the future.
It may not be quick, as it could very well take 30 years or more of regular monthly investments to get there, but it is possible to achieve. Here's how.
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Investing in a top Vanguard fund that tracks the market can set investors up for significant gains
There are many ETFs for investors to select from. It can be overwhelming, but there are some excellent options from Vanguard that have low fees and are ideal for long-term investing.
The Vanguard S&P 500 ETF (VOO -0.47%) is one of the more popular options, as it has an expense ratio of just 0.03%. On a $10,000 investment, that equates to just $3 in fees per year. Minimizing fees is important for long-term investing to ensure they don't eat into returns, which, in turn, allows more money to compound over time, allowing the portfolio to grow at a high rate.
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Key Data Points
The ETF tracks the S&P 500, which is a collection of the top stocks on U.S. markets, making it an effective way to track the overall stock market and economy. While there will inevitably be dips and downturns along the way, the market has always recovered, and over the very long run, the S&P 500 has averaged annual returns of around 10%.
How much would a $450-per-month investment be worth after 30 years?
The following table shows how a $450-per-month investment might grow over the years, assuming a 10% annual rate.
| Year | 10% Return |
|---|---|
| 5 | $35,137 |
| 10 | $92,948 |
| 15 | $188,066 |
| 20 | $344,564 |
| 25 | $602,051 |
| 30 | $1,025,696 |
Table and calculations by author.
These values will inevitably vary since the returns can and will deviate over the years. But if the S&P 500 grows in line with its long-run average of about 10%, then after investing $450 per month for 30 years, a portfolio could end up being worth more than $1 million.
Investors who want to reach the $1 million mark more quickly can accelerate gains by investing more money each month or by investing large lump sums at the beginning or periodically, such as from tax refunds or other cash inflows. But investing regularly in a top fund that tracks the overall market, such as the Vanguard S&P 500 ETF, can be a relatively low-risk way to grow a portfolio's balance in the long run.
