Investing every month is a great habit to get into.
There are many ways to try and cut costs and save money. From canceling unused subscriptions to consolidating debts to spending less money on eating out, cost-cutting moves can potentially give you some room to put money aside and invest. And there's a big incentive to do so: It can help you become a millionaire.
If you can shave off $10 per day in costs, or $300 per month, and regularly invest that into a growth-focused exchange-traded fund (ETF), you can eventually have a portfolio worth more than $1 million. Here's how.
A growth-focused fund will allow you to generate the best long-run returns
You can invest in the S&P 500 to get broad and diverse exposure to the stock market. Over time, your returns will increase at the index's long-term average rate of around 10%. But if you are investing and have decades of years to go, then focusing more on growth stocks can be advantageous to you. While you take on a bit more risk by doing so, you can achieve better returns in the end. While growth stocks may experience volatility and there could be a bad year (like 2022), in the long run they are likely to rise in value and outperform broader and more diverse funds.
One fund that is particularly attractive is the Vanguard Growth Index Fund (VUG -0.41%). As the name suggests, it is a growth-focused fund that targets some of the best stocks in the world. It has a minuscule expense ratio of just 0.04%, which will ensure that fees don't eat up much of your returns. And at close to 200 stocks, there's some excellent diversification there as well. Top stocks such as Microsoft, Apple, and Nvidia make up its top-three holdings and account for close to one-third of the fund.
Over the past 10 years, the Vanguard Growth Index has generated returns of 270%, outperforming the S&P 500, which is up 177% during the same time period. At 270%, the fund's compounded annual growth rate averages out to 14%.
How $300 per month can turn into to $1 million
If you invest $300 each month, that comes out to $3,600 over the course of a full year. And after 30 years of investing, that would total $108,000. But with the power of compounding, your portfolio's value could rise far higher than that.
Assuming you invested $300 every month into the Vanguard Growth Index Fund and it achieved gains of 14% per year on average, then this is how your portfolio's value could grow over the years.
| Year | Balance |
|---|
| 5 | $26,160.22 |
| 10 | $78,627.41 |
| 15 | $183,856.13 |
| 20 | $394,903.88 |
| 25 | $818,183.31 |
| 26 | $944,257.50 |
| 27 | $1,089,159.85 |
| 28 | $1,255,702.22 |
| 29 | $1,447,116.37 |
| 30 | $1,667,116.69 |
Calculations by author.
It would take between 26 and 27 years for your portfolio to hit the $1 million mark. That means if you start investing $300 per month at the age of 39, that could still be enough time to get to $1 million by the time you retire, assuming you do so at the age of 65. If you don't start investing until later in life, you can of course make up for this by investing more money. Either way, it's a fairly simple strategy that any investor can deploy: Put money aside every month, and put it into a diversified growth fund such as the Vanguard Growth Index Fund.
Admittedly, 14% is a high average annual return, and your actual returns and growth rate will undoubtedly vary. However, you'll be giving yourself a great opportunity to profit from growth stocks in the long run by investing in this ETF.
There's never a bad time to invest
Even if the current economic conditions can make it difficult to save money, putting any amount aside into an ETF can be a great move for investors. Getting into the habit of saving and investing every month is a great routine to start. Many brokerages nowadays offer low- or no-cost commissions, making it worthwhile to even invest small amounts of money into ETFs. And in the end, you'll be better off for it by being in a much stronger financial position by the time you retire.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, and Vanguard Index Funds-Vanguard Growth ETF. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
FAQs
Vanguard Index Funds - Vanguard Growth ETF
How much do I need to invest to make a million dollars? ›
Suppose you're starting from scratch and have no savings. You'd need to invest around $13,000 per month to save a million dollars in five years, assuming a 7% annual rate of return and 3% inflation rate. For a rate of return of 5%, you'd need to save around $14,700 per month.
How much will I have if I invest $500 a month for 30 years? ›
What happens when you invest $500 a month
| Rate of return | 10 years | 30 years |
|---|
| 4% | $72,000 | $336,500 |
| 6% | $79,000 | $474,300 |
| 8% | $86,900 | $679,700 |
| 10% | $95,600 | $987,000 |
Nov 15, 2023
Given an average 10% rate of return on the S&P 500, you need to save about $1,400 per month in order to save up $1 million over 20 years. That's a lot of money, but the good news is that changing the variables even a little bit can make a big difference.
How much will I have if I invest $1000 a month for 30 years? ›
As a rule of thumb, the sooner you start saving for retirement the better. If you start by contributing $1,000 a month to a retirement account at age 30 or younger, your savings could be worth more than $1 million by the time you retire.
How much will I have if I invest $300 a month? ›
If you invest $300 each month, that comes out to $3,600 over the course of a full year. And after 30 years of investing, that would total $108,000. But with the power of compounding, your portfolio's value could rise far higher than that.
How much money do I need to invest to make $4000 a month? ›
Making $4,000 a month based on your investments alone is not a small feat. For example, if you have an investment or combination of investments with a 9.5% yield, you would have to invest $500,000 or more potentially. This is a high amount, but could almost guarantee you a $4,000 monthly dividend income.
How long in years will it take a $300 investment to be worth $800 if it is continuously compounded at 12% per year? ›
Thus, it will take approximately 8.17 years.
What if I invested $1000 in S&P 500 10 years ago? ›
Over the past decade, you would have done even better, as the S&P 500 posted an average annual return of a whopping 12.68%. Here's how much your account balance would be now if you were invested over the past 10 years: $1,000 would grow to $3,300. $5,000 would grow to $16,498.
How many years it will take you to double your money if you invest $500 at an interest rate of 8% per year? ›
For example, if an investment scheme promises an 8% annual compounded rate of return, it will take approximately nine years (72 / 8 = 9) to double the invested money.
Here are seven proven steps to get you wealthy in five years:
- Build your financial literacy skills. ...
- Take control of your finances. ...
- Get in the wealthy mindset. ...
- Create a budget and live within your means. ...
- Step 5: Save to invest. ...
- Create multiple income sources. ...
- Surround yourself with other wealthy people.
Some experts recommend withdrawing 4% each year from your retirement accounts. To generate $500 a month, you might need to build your investments to $150,000. Taking out 4% each year would amount to $6,000, which comes to $500 a month.
How to turn 100k into a million? ›
If you keep saving, you can get there even faster. If you invest just $500 per month into the fund on top of the initial $100,000, you'll get there in less than 20 years on average. Adding $1,000 per month will get you to $1 million within 17 years. There are a lot of great S&P 500 index funds.
What will $10 000 be worth in 30 years? ›
Today's savings account rates aren't the norm, so let's assume that keeping your $10,000 in cash results in an average annual 2% return over 30 years. In that case, you're growing your $10,000 into about $18,000.
How much should I invest a month to become a millionaire in 10 years? ›
Now, let's consider how our calculations change if the time horizon is 10 years. If you are starting from scratch, you will need to invest about $4,757 at the end of every month for 10 years. Suppose you already have $100,000. Then you will only need $3,390 at the end of every month to become a millionaire in 10 years.
What happens if I invest $500 a month? ›
You can become a millionaire by investing $500 per month consistently for almost 30 years. This is a low-effort strategy, but you can achieve this goal even faster through the right combination of individual stocks. Should you invest $1,000 in Vanguard S&P 500 ETF right now?
How much to invest to become a millionaire? ›
Assuming that you can earn this 10% average return over your investing career, if you are getting started investing this year and you want to become a millionaire in 30 years, you would need to invest $506.60 per month. This amount may seem like a lot, but it may actually be pretty doable for many people.
How much income do you need to buy a $1000000? ›
Income Necessary for a $1 Million Home (California)
| 3.5% DOWN FHA FINANCING: | $230,000 per year** |
|---|
| 15% DOWN CONVENTIONAL FINANCING: | $200,000 per year** |
| 20% DOWN CONVENTIONAL FINANCING: | $185,000 per year** |
Aug 5, 2022
If you keep saving, you can get there even faster. If you invest just $500 per month into the fund on top of the initial $100,000, you'll get there in less than 20 years on average. Adding $1,000 per month will get you to $1 million within 17 years.
How to invest $100 000 to make $1 million? ›
4 Ways to Grow $100,000 Into $1 Million for Retirement Savings
- Index funds. ...
- Dividend-paying stocks. ...
- Growth stocks. ...
- Value stocks.
