With a few simple steps, you could be on your way to millionaire status.
Investing in the stock market is a tried-and-true way to generate long-term wealth, and while reaching $1 million may seem like a lofty goal, it’s not as difficult as it might appear.
You don’t have to be a stock market expert to earn $1 million or more, but you will need the right investing strategy. There’s no single correct way to invest, and the best approach for you will depend on your preferences and risk tolerance.
That said, there’s a simple and straightforward strategy to maximize your long-term earnings while minimizing risk. Whether you’re new to the stock market or just want a no-fuss way to build wealth, this step-by-step process can take you from $0 to $1 million or more.
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1. Get started investing right now
The more time you give your money to grow, the less you’ll need to invest each month to reach $1 million. Thanks to compound growth, your investments will accumulate exponentially faster over time. Getting started as soon as possible, then, is key to maximizing your earnings.
Even if you can’t afford to invest much right now, every year counts. For example, say you’re earning a modest 9% average annual return on your investments — which is just under the market’s historic average. Here’s approximately how much you’d need to invest each month to reach $1 million, depending on how many years you have to save:
| Number of Years | Amount Invested per Month | Total Portfolio Value |
|---|---|---|
| 20 | $1,700 | $1.044 million |
| 25 | $1,000 | $1.016 million |
| 30 | $625 | $1.022 million |
| 35 | $400 | $1.035 million |
| 40 | $250 | $1.014 million |
Data source: Author’s calculations via investor.gov.
It’s never too early to start investing, and the sooner you begin, the easier it will be to build a substantial amount of wealth. You can always invest more later if you can swing it, but you won’t get this precious time back.
2. Don’t worry about timing the market
The stock market will always be volatile to a degree, and it can be nerve-wracking trying to determine the best time to buy. Many people are understandably worried about investing right before prices drop, and it can be tempting to hold off on buying until the perfect moment.
However, there’s never going to be a perfect time to invest in the stock market, and the longer you wait to invest, the harder it will be to catch up later. While it may seem counterintuitive, it’s often safer to simply invest consistently no matter what the market is doing.
This approach is called dollar-cost averaging, and it involves investing a set amount at regular intervals throughout the year. Sometimes you’ll end up buying when prices are at their peaks, and other times you’ll snag investments at steep discounts. Over time, those highs and lows should average out.
Dollar-cost averaging can help take the guesswork out of when to buy, making it easier to invest consistently. Again, time is your most valuable resource when building wealth, so consistency is key to reaching $1 million or more.
3. Choose long-term investments
All investments are subject to short-term volatility, but stocks from healthy companies with solid underlying fundamentals have the best chance of recovering from downturns and earning positive long-term returns.
These types of stocks won’t see explosive growth overnight, but they are more likely to earn consistent returns over time. This makes them much safer than short-term investments promising to make a quick buck.
If you’d prefer a more low-maintenance investment, a broad-market index fund or ETF may be your best bet. The S&P 500 index fund, for example, tracks the S&P 500 index and includes stocks from all 500 companies within the index itself. This can help create an instantly diversified portfolio with next to no effort, limiting your risk while still setting you up for positive long-term returns.
If you’re willing to put in more effort for the chance to earn above-average returns, investing in individual stocks may be a better fit. This approach requires more research, as you’ll need to study each stock you’re interested in buying as well as keep up with industry trends going forward. But with the right portfolio, you could earn far higher-than-average returns over time.
Building a million-dollar portfolio isn’t necessarily easy, but it’s simpler than it might seem. By getting started early, investing consistently, and keeping a long-term outlook, you’ll be on your way to becoming a stock market millionaire.