You don’t need to start with tens of thousands of dollars to become a millionaire. In fact, you don’t necessarily need a huge monthly investment to hit that goal either. Just $300 a month can get the job done.
It won’t happen quickly, though. You’ll need a disciplined process in which you consistently invest each month, regardless of market conditions, and resist the temptation to sell when things get bad. If you can do this, you can turn $300 a month into $1 million.
Source: Getty Images.
Over the past century, the S&P 500 (^GSPC -0.52%) has delivered an average annual return of roughly 10% with dividends reinvested. While nothing is guaranteed, that’s a good assumption to use for U.S. stock returns in the future.
Assuming you invest $300 monthly into something like the Vanguard S&P 500 ETF (VOO -0.53%), here’s how long it would take to amass $1 million at different annualized rates of return.
| Annual return | Years to invest |
|---|---|
| 6% | 48 |
| 8% | 40 |
| 10% | 34 |
| 12% | 30 |
Source: Calculator.net
At a 10% annual return, you’d invest a total of $122,400 over the course of those 34 years. That means roughly 88% of your account balance would have come from capital growth on your investment. That’s the power of long-term compounding returns.
The process for achieving this doesn’t have to be complicated either. Invest $300 a month into the Vanguard S&P 500 ETF and continue doing so for as long as you can. Increase your monthly investment over time or add pay raises and bonuses to your brokerage account, and you can hit the $1 million mark even quicker.
With enough time, the seemingly impossible is quite realistic.
David Dierking has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
