If you have a long-term goal of reaching a one million dollars, then stocks are still one of the best options for reaching that goal. A stock market down-turn can send shivers down your spine, but the best time to actually purchase stocks and get the best deals is when the market is down or beat up.
How long will it take to reach a million dollars?
How long it actually takes you to reach one million dollars or more, greatly depends on how much you begin with, how much and how often you add to your investing portfolio, and how much you earn over time on your investments.
If you took a $50,000 lump sum and invested it into the stock market, in less than 32 years’ time, that lump sum investment would turn into $1 million. This is based-off U.S. stocks having an annual return of 10 percent over the long-term, including dividends.If you invested $10,000 per year into a tax-deferred account, it would take you 24 years to reach one million dollars.
Old Bull Markets Offer Lower Returns
We’re currently seven years into a bull market, and since 2009 the prices of stock shares have more than tripled. Since high share prices make buying stocks more expensive, experts believe future returns from stocks to be slightly lower. In an article written by E.S. Browning, a reporter for the Wall Street Journal, he also agrees that we should expect lower returns from stocks in the future.
Some experts believe over the next decade stocks will return an average of 6.5 percent. If this is true, investing $10,000 a year, it’ll take you 31 years to reach $1 million.
During large market declines, you can take advantage of those declines by purchasing stocks at a discount, which in the long run can have nice payouts. The more share prices drop, the more opportunity you have to take advantage of buying discounted stocks.
A good strategy to use to boost your gains and get higher returns is called “buying on dips.” How this strategy works is when the stock market drops 10 percent, you take advantage of the drop by buying. Then if the market drops another 10 percent, you purchase more.
A big mistake many people make is they pull money out of the market when it drops, when instead that’s the time they should be putting money into the market. Stay disciplined through all markets and before you know it, you’ll have a million dollars!
How To Invest In Stocks
Thanks to the internet and advancing technology you no longer have to go through a traditional broker or financial advisor, who are expensive and inconvenient. Instead, you can now use an online discount stock broker or use a robo-advisor.
Online Discount Brokers
Online discount brokers allow you to buy and sell stocks for a small commission per transaction and are very affordable. A great online discount broker which I personally use for buying and holding stocks is OptionsHouse. I’ve had an account with OptionsHouse for almost 9 years now and have been completely satisfied with their service and trading platform. They only charge $4.95 per stock trade, that’s it, there are absolutely no other fees associated with the account and is one of the many reasons I’ve used them for so long.
Automate Your Investing
Robo-advisors, short for “robotic investment advisors,” are very similar to traditional investment advisors, except robo-advisors have been proven to be more effective and only charge a fraction of the fees as to what a traditional financial advisor would charge. Another nice feature robo-advisors have is they allow you to automate your investing, so you can set-it-and-forget-it.
Betterment is probably the best robo-advisor available and I personally love their service. They only charge a 0.35 percent annual management for accounts that have a balance under $10,000, only 0.25 percent for accounts with a balance between $10,000 to $100,000, and only 0.15 percent for accounts with a balance greater than $100,000. My Betterment account is completely automated and doesn’t require any interaction on my part, as money is automatically deposited into my account every month, they invest it on my behalf based-off my preferences and automatically rebalance my portfolio for me.
With a few hundred dollars per month, you could be on your way to millionaire status. Building a portfolio worth $1 million or more isn't easy, but it's more attainable than it may seem. You don't need to be a stock market expert or have thousands of dollars to invest each month, but you will need the right strategy.
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.
Interest-bearing assets can be a very smart way to invest $1 million while also keeping it safe. Bonds are generally your best choice for maximizing returns, but assets like a certificate of deposit or an annuity can be useful if you want to minimize risk.
So, sticking with an index fund is a good bet for most. If you put $100,000 to work in an S&P 500 index fund, and it returns its average 6.5% real compound annual return, it'll take less than 37 years for you to reach $1 million in today's dollars.
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.
A stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income, Mircea Iosif wrote on Medium. “For example, at a 4% dividend yield, you would need a portfolio worth $300,000.
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.
Bonds and money market accounts may be a good option for those with more conservative risk tolerance. Treasury bonds and municipal bonds typically offer lower returns but come with less risk. With a bond paying a 2% interest rate, a $1 million investment could earn you $20,000 per bond pay interest income annually.
Around the U.S., a $1 million nest egg can cover an average of 18.9 years worth of living expenses, GoBankingRates found. But where you retire can have a profound impact on how far your money goes, ranging from as a little as 10 years in Hawaii to more than than 20 years in more than a dozen states.
Alongside Microsoft Corporation (NASDAQ:MSFT), NVIDIA Corporation (NASDAQ:NVDA), and Apple Inc. (NASDAQ:AAPL), Adobe Inc. (NASDAQ:ADBE) is one of the best money making stocks to invest in. In its Q3 2023 investor letter, Polen Capital, an asset management firm, highlighted a few stocks and Adobe Inc.
Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc.(NASDAQ:GOOGL), and Advanced Micro Devices, Inc.(NASDAQ:AMD) are some of the stocks that will make you rich in 2024, besides Palantir Technologies Inc. (NYSE:PLTR).
Can You Make a Lot of Money in Stocks? Yes, if your goals are realistic. Although you hear of making a killing with a stock that doubles, triples, or quadruples in price, such occurrences are rare, and/or usually reserved for day traders or institutional investors who take a company public.
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.
Given how you can turn a dollar into a million, you can only imagine what's possible when you start with a larger sum. Just put away $10,000 and never save another dime and you'll be sitting on a million dollars in 30 years if you can pick a stock that returns 16.6% annually.
The timeline for achieving this goal depends on your returns. For example, a 10% average annual rate of return could transform $100,000 into $1 million in approximately 25 years, while an 8% return might require around 30 years.
Image source: Getty Images. Building a $1 million portfolio will generally take a few decades, unless you can afford to invest several thousand dollars per month. But every year counts, so even if you can't afford to invest much right now, it's better to get started anyway.
Introduction: My name is Terence Hammes MD, I am a inexpensive, energetic, jolly, faithful, cheerful, proud, rich person who loves writing and wants to share my knowledge and understanding with you.
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