You may be able to amass $1 million even if you start with nothing!
If you want to turn $100,000 into $1 million for your retirement, that’s a solid goal, as many people need that million, along with Social Security, to provide sufficient income. Not everyone has $100,000 to start with, though. That’s generally OK, though, because many of us can start with zero and get to a million dollars by retirement.
Here’s a look at four ways that you can boost your portfolio’s value from $100,000 to $1 million — or from $0 to $1 million.
1. Start early
The best advice can be impossible for some of us: start saving and investing early! Check out the following table, which shows how your wealth will grow if you start with $100,000 and do nothing more for years:
| GROWING AT 8% FOR: | RESULT |
|---|---|
| 5 years |
$146,933 |
| 10 years |
$215,892 |
| 15 years |
$317,217 |
| 20 years |
$466,096 |
| 25 years |
$684,848 |
| 30 years |
$1,006,266 |
| 35 years |
$1,478,534 |
| 40 years |
$2,172,452 |
DATA SOURCE: AUTHOR.
The table shows how money grows much faster after it’s been growing a while. It will take you 30 years to reach $1 million this way, though.
2. Save aggressively
The next savvy way to amass wealth is to be socking away significant sums regularly. This table shows how much wealth you might build over time if you start with $100,000:
|
STARTING WITH $100,000 AND GROWING AT 8% FOR: |
$6,000 INVESTED ANNUALLY |
$12,000 INVESTED ANNUALLY |
|---|---|---|
| 5 years |
$184,948 |
$222,964 |
| 10 years |
$309,765 |
$403,638 |
| 15 years |
$493,163 |
$669,108 |
| 20 years |
$762,633 |
$1,059,171 |
| 25 years |
$1,158,574 |
$1,632,301 |
| 30 years |
$1,740,341 |
$2,474,416 |
| 35 years |
$2,595,147 |
$3,711,760 |
| 40 years |
$3,851,138 |
$5,529,825 |
DATA SOURCE: AUTHOR.
You can still do quite well if you’re starting with zero:
|
STARTING WITH $0 AND GROWING AT 8% FOR: |
$6,000 INVESTED ANNUALLY |
$12,000 INVESTED ANNUALLY |
|---|---|---|
| 5 years |
$38,016 |
$76,032 |
| 10 years |
$93,873 |
$187,746 |
| 15 years |
$175,946 |
$351,892 |
| 20 years |
$296,538 |
$593,076 |
| 25 years |
$473,726 |
$947,452 |
| 30 years |
$734,075 |
$1,468,150 |
| 35 years |
$1,116,613 |
$2,233,226 |
| 40 years |
$1,678,686 |
$3,357,372 |
DATA SOURCE: AUTHOR.
3. Invest effectively
Another vital component of successful wealth building is to invest effectively. For most of us, that means favoring the stock market with our long-term investing. Wharton Business School professor Jeremy Siegel has studied investment performances over very long period, and reports that between 1946 and 2021, stocks grew at an average annual rate of 11.3%, versus only 5.8% for long-term government bonds. Average annual gains of 10% are more reasonable goals, though you can certainly hope for 11%, 12%, or more. And you might, of course, average less.
Here’s how money grows at different average annual growth rates if you sock away $10,000 annually:
| GROWING FOR: | GROWING AT 6% | GROWING AT 8% | GROWING AT 10% |
|---|---|---|---|
| 10 years |
$139,716 |
$156,455 |
$175,312 |
| 15 years |
$246,725 |
$293,243 |
$349,497 |
| 20 years |
$389,927 |
$494,229 |
$630,025 |
| 25 years |
$581,564 |
$789,544 |
$1.1 million |
| 30 years |
$838,017 |
$1.2 million |
$1.8 million |
| 35 years |
$1.2 million |
$1.9 million |
$3.0 million |
| 40 years |
$1.6 million |
$2.8 million |
$4.9 million |
DATA SOURCE: AUTHOR.
The S&P 500 has averaged annual gains of close to 10% over long periods. You can aim for a market-meeting return by investing in one or more broad-market, low-fee index funds. Here are some to consider:
- Vanguard S&P 500 ETF (NYSEMKT: VOO)
- SPDR S&P 500 ETF (NYSEMKT: SPY)
- Vanguard Total Stock Market ETF (NYSEMKT: VTI)
- Vanguard Total World Stock ETF (NYSEMKT: VT)
Index funds can be all you need to build wealth, but if you want to take on more risk and aim for bigger gains, you might consider investing in some growth stocks. Some growth stocks will deliver phenomenal returns, but some will disappoint, too. That’s why it’s smart to spread your dollars across a bunch of them. Our Foolish investing philosophy suggests buying into around 25 or more companies and aiming to hang on to your shares for at least five years.
You can always invest in both index funds and individual stocks. And you might include dividend-paying stocks in your mix, as well, as they tend to be more established companies.
4. Stay focused
Finally, you will need to stay focused, with your eyes on the prize. Building great wealth in a fairly reliable way takes time, and a lot of it. You will experience market downturns and slumps. You will get discouraged. You might simply get bored and stop paying attention to your investments. Don’t do that. You needn’t stare at your portfolio 24/7, but at a minimum, you should check up on your progress — and that of any individual stocks you own — at least once per quarter.
For best results as you aim for that million dollars, try to do all four of the things above: Start as soon as you can, sock away significant sums regularly, invest effectively, and persevere over many years.
