What if I invest $200 a month for 20 years?
Investing as little as $200 a month can, if you do it consistently and invest wisely, turn into more than $150,000 in as soon as 20 years. If you keep contributing the same amount for another 20 years while generating the same average annual return on your investments, you could have more than $1.2 million.
How that works, in practice: Let's say you invest $200 every month for 10 years and earn a 6% average annual return. At the end of the 10-year period, you'll have $33,300. Of that amount, $24,200 is money you've contributed — those $200 monthly contributions — and $9,100 is interest you've earned on your investment.
If you were to invest $200 per month over the course of the next 30 years, that would equate to a total investment of $72,000. That's significant, but it's through the effects of compounding that would get your portfolio to a more than $1 million valuation.
We all have to start somewhere. Investing £200 per month over the long term could lead to more wealth than you'd probably imagine. For example, a £200 monthly investment with a 7% yearly return could leave you with over £104,000 in 20 years or more than £360,000 in 35 years.
And of course, when we assume that one is able to invest $200 per month, you will have about $1.93 million when you are 65 (assuming a 6% annual return rate) or $3.19 million (assuming a 7% annual return rate).
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.
Discount Rate | Present Value | Future Value |
---|---|---|
20% | $1,000 | $38,337.60 |
21% | $1,000 | $45,259.26 |
22% | $1,000 | $53,357.64 |
23% | $1,000 | $62,820.62 |
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.
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.
Years Invested | Balance At the End of the Period |
---|---|
10 | $102,422 |
20 | $379,684 |
30 | $1,130,244 |
40 | $3,162,040 |
How much should I invest a month 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.
For example, if you are able to commit to investing $500 a month in an S&P 500 index fund like the Vanguard 500 Fund (NYSEMKT: VOO), you'll eventually have $1 million, and that includes paying the 0.03% expense ratio in the ETF, meaning you'll pay 3 cents each year for every $100 you have invested in the index fund.
On average, the stock market yields between an 8% to 12% annual return. Investing $100 per month, with an average return rate of 10%, will yield $200,000 after 30 years. Due to compound interest, your investment will yield $535,000 after 40 years. These numbers can grow exponentially with an extra $100.
If you were to invest $200 per month over the course of the next 30 years, that would equate to a total investment of $72,000. That's significant, but it's through the effects of compounding that would get your portfolio to a more than $1 million valuation.
- Vanguard Growth ETF. The Vanguard Growth ETF (VUG -0.61%) contains 208 stocks with the potential for above-average growth. ...
- Schwab U.S. Large-Cap Growth ETF. The Schwab U.S. Large-Cap Growth ETF (SCHG -0.44%) contains 251 stocks with the potential for above-average growth. ...
- Invesco QQQ.
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.
Let's say you want to become a millionaire in five years. If you're starting from scratch, online millionaire calculators (which return a variety of results given the same inputs) estimate that you'll need to save anywhere from $13,000 to $15,500 a month and invest it wisely enough to earn an average of 10% a year.
- Freeport-McMoRan Inc (NYSE:FCX)
- Comcast Corporation (NASDAQ:CMCSA) ...
- AES Corp (NYSE:AES) ...
- Tarsus Pharmaceuticals Inc (NASDAQ:TARS) ...
- ChargePoint Holdings Inc (NYSE:CHPT) ...
To make $1,000 per month on T-bills, you would need to invest $240,000 at a 5% rate. This is a solid return — and probably one of the safest investments available today. But do you have $240,000 sitting around? That's the hard part.
The table below shows the present value (PV) of $3,000 in 20 years for interest rates from 2% to 30%. As you will see, the future value of $3,000 over 20 years can range from $4,457.84 to $570,148.91.
How much will $100 be worth in 10 years?
Discount Rate | Present Value | Future Value |
---|---|---|
2% | $100 | $121.90 |
3% | $100 | $134.39 |
4% | $100 | $148.02 |
5% | $100 | $162.89 |
Over the years, that money can really add up: If you kept that money in a retirement account over 30 years and earned that average 6% return, for example, your $10,000 would grow to more than $57,000. In reality, investment returns will vary year to year and even day to day.
Historically, the stock market has an average annual rate of return between 10–12%. So if your $1 million is invested in good growth stock mutual funds, that means you could potentially live off of $100,000 to $120,000 each year without ever touching your one-million-dollar goose. But let's be even more conservative.
Investing $1,000 a month for 20 years would leave you with around $687,306. The specific amount you end up with depends on your returns -- the S&P 500 has averaged 10% returns over the last 50 years. The more you invest (and the earlier), the more you can take advantage of compound growth.
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.
References
- https://finance.yahoo.com/news/heres-investing-200-per-month-113400173.html
- https://www.investopedia.com/financial-edge/0709/so-you-wanna-be-a-millionaire-how-long-will-it-take.aspx
- https://www.thriventfunds.com/insights/investing-essentials/investing-50-a-month-could-add-up-nicely-for-your-retirement.html
- https://lyonswealth.com/blog-details/how-much-money-do-i-need-to-invest-to-make-3000
- https://www.stash.com/learn/how-much-should-i-be-investing/
- https://www.bankinter.com/banca/en/investment-savings/investment-funds/funds-for-beginners/advantages-investment-funds
- https://www.investopedia.com/terms/i/indexfund.asp
- https://www.mikevestil.com/wealth/how-to-invest-and-make-money/
- https://finance.yahoo.com/news/save-1-million-20-years-140037827.html
- https://www.nerdwallet.com/article/investing/how-to-start-investing
- https://www.fool.com/investing/how-to-invest/how-to-invest-100-dollars/
- https://www.westernsouthern.com/investments/mutual-funds-vs-stocks
- https://www.fool.com/investing/how-to-invest/stocks/how-many-stocks-should-i-own/
- https://www.fool.com/the-ascent/buying-stocks/articles/will-investing-100-a-month-really-make-a-difference-in-your-net-worth/
- https://tools.carboncollective.co/future-value/3000-in-20-years/
- https://money.usnews.com/investing/articles/how-to-become-a-millionaire-by-investing
- https://www.cnbc.com/2024/04/15/blackrock-investing-chief-why-you-should-invest-early.html
- https://www.investopedia.com/ask/answers/021615/what-safest-investment.asp
- https://www.nerdwallet.com/article/investing/make-money-in-stocks
- https://www.nasdaq.com/articles/the-3-best-stocks-to-buy-if-you-only-have-%24100-to-invest%3A-march-edition
- https://millennialmoney.com/make-1000-in-24-hours/
- https://www.forbes.com/sites/pattieehsaei/2023/10/12/you-can-afford-to-invest-start-with-just-100-per-month/
- https://money.com/hedge-funds-use-warren-buffett-advice/
- https://www.nasdaq.com/articles/3-no-brainer-stocks-to-buy-with-%24100-right-now-9
- https://tools.carboncollective.co/future-value/1000-in-20-years/
- https://finance.yahoo.com/news/much-retirement-saved-100-month-130108345.html
- https://www.fool.com/investing/2022/02/12/should-index-funds-be-your-only-investment/
- https://www.kiplinger.com/retirement/is-investing-in-mutual-funds-worth-it
- https://www.nysaves.org/home/basics-of-529s/saving-early-matters.html
- https://www.fool.com/investing/how-to-invest/stocks/good-time-to-buy-stocks/
- https://money.usnews.com/money/retirement/articles/how-can-i-earn-100-200-or-500-per-month-in-guaranteed-income-in-retirement
- https://www.bankrate.com/investing/best-mutual-funds/
- https://www.investopedia.com/articles/stocks/09/reasons-to-avoid-index-funds.asp
- https://finance.yahoo.com/news/500-every-month-passive-income-130041730.html
- https://finance.yahoo.com/news/genius-ways-1-000-month-105500970.html
- https://www.fool.com/investing/2024/01/28/heres-how-investing-200-per-month-can-create-1-mil/
- https://money.usnews.com/investing/articles/best-value-stocks-to-buy-now
- https://www.fidelity.com/learning-center/trading-investing/new-bull-market-2024
- https://business.outlookindia.com/invest/investing-in-stocks-vs-mutual-funds-a-tale-of-risk-and-reward
- https://www.nerdwallet.com/article/investing/how-to-invest-in-index-funds
- https://www.schwab.com/mutual-funds/understand-mutual-funds
- https://www.finder.com/uk/share-trading/best-way-to-invest-200-per-month
- https://www.fool.com/investing/2024/03/10/3-magnificent-growth-etfs-to-turn-200-a-month-into/
- https://www.nasdaq.com/articles/dave-ramsey:-invest-$100-a-month-to-become-a-millionaire-in-retirement
- https://www.fool.com/the-ascent/banks/articles/what-if-i-can-only-afford-to-save-200-per-month/
- https://www.hsbc.co.uk/investments/is-investing-worth-the-risk/
- https://www.fool.com/the-ascent/buying-stocks/articles/heres-what-happens-when-you-invest-100-a-month-for-40-years/
- https://investwithcarl.com/learning-center/investment-basics/investment-types/liquid-investments
- https://medium.datadriveninvestor.com/investing-for-retirement-100-to-200-per-month-could-be-enough-8b91f26ed33b
- https://www.talent.com/convert?salary=500&start=month&end=year
- https://www.bankrate.com/investing/stocks-vs-mutual-funds/
- https://www.investopedia.com/articles/investing/022516/saving-vs-investing-understanding-key-differences.asp
- https://www.fca.org.uk/investsmart/understanding-high-risk-investments
- https://fortune.com/recommends/investing/how-much-of-your-income-should-go-toward-investing/
- https://www.financialsymmetry.com/5-reasons-to-consider-not-only-investing-in-the-sp-500-ep-209/
- https://www.fool.com/the-ascent/buying-stocks/articles/starting-to-invest-in-2024-heres-how-much-youll-need-to-become-a-millionaire-in-30-years/
- https://www.gobankingrates.com/investing/strategy/how-to-invest-100-to-make-1000/
- https://www.nerdwallet.com/article/investing/best-performing-mutual-funds
- https://www.nasdaq.com/articles/10-unique-ways-to-invest-$100-and-grow-it-to-$1000
- https://finance.yahoo.com/news/stock-market-just-flashed-bullish-020701595.html
- https://www.ajbellmoneymatters.co.uk/articles/how-often-should-i-invest
- https://ndvr.com/journal/how-many-stocks-should-you-own
- https://www.nerdwallet.com/calculator/compound-interest-calculator
- https://www.quora.com/What-is-a-reasonable-amount-for-a-beginner-to-invest-in-stocks-and-options-trading
- https://groww.in/blog/best-investment-for-monthly-income-in-india
- https://www.nasdaq.com/articles/got-%24500-to-invest-monthly-this-exchange-traded-fund-can-make-you-a-millionaire.
- https://finance.yahoo.com/most-active
- https://smartasset.com/investing/pros-and-cons-of-stocks
- https://www.blackrock.com/us/individual/insights/taking-stock-quarterly-outlook
- https://www.quora.com/Is-it-advisable-to-invest-in-the-stock-market-if-you-have-only-50-or-100-dollars
- https://www.indmoney.com/articles/top-5-stocks-to-invest
- https://ca.finance.yahoo.com/news/much-invest-500-dividends-month-011500918.html
- https://www.morningstar.com/portfolios/best-investments-own-during-recession
- https://finance.yahoo.com/news/got-200-per-month-3-120000627.html
- https://www.nerdwallet.com/article/investing/average-stock-market-return
- https://www.livemint.com/market/stock-market-news/day-trading-stocks-to-buy-anand-rathi-expert-recommends-three-shares-to-buy-today-19th-april-11713490855901.html
- https://www.morningstar.com/stocks/10-best-dividend-stocks
- https://time.com/personal-finance/article/mutual-funds-vs-stocks/
- https://www.bankbazaar.com/mutual-fund/Top-10-Mutual-Funds-India.html
- https://www.cnbc.com/2019/08/30/how-to-turn-100-into-1-million-according-to-self-made-millionaires.html
- https://www.livemint.com/market/stock-market-news/why-is-india-stock-market-down-today-explained-with-5-reasons-11713153938923.html
- https://poe.com/poeknowledge/1512928000365106
- https://www.businessinsider.com/personal-finance/recession-things-not-to-buy-2022-12
- https://www.fool.com/investing/how-to-invest/what-to-invest-in-recession/
- https://www.unfcu.org/financial-wellness/50-30-20-rule/
- https://www.ramseysolutions.com/retirement/can-you-retire-on-1-million
- https://medium.com/@Levente22/14-proven-ways-to-make-2-000-3-000-per-month-in-passive-income-2107fea2ee03
- https://www.schwab.com/learn/story/are-mutual-funds-good-investment
- https://www.investopedia.com/terms/s/stock-market-crash.asp
- https://www.fool.com/investing/2024/01/24/billionaires-cant-get-enough-of-this-etf-in-2024/
- https://www.investopedia.com/ask/answers/05/062305.asp
- https://www.moneysavingexpert.com/savings/guide-to-funds/
- https://www.forbes.com/advisor/banking/savings/millionaire-calculator/
- https://tools.carboncollective.co/future-value/100-in-10-years/
- https://www.fool.com/the-ascent/buying-stocks/articles/i-can-only-afford-to-save-100-a-month-whats-the-smartest-thing-i-can-do-with-it/
- https://www.bankrate.com/investing/low-risk-investments/
- https://www.nasdaq.com/articles/got-%24500-a-month-to-invest-heres-how-the-sp-500-could-make-you-a-millionaire
- https://www.moneycontrol.com/news/business/personal-finance/owning-too-many-stocks-can-hurt-your-portfolio-returns-7950751.html
- https://www.fool.com/the-ascent/banks/where-put-money-recession/
- https://www.quora.com/What-is-the-recommended-amount-of-money-for-a-beginner-to-start-trading-and-investing-in-stocks-What-percentage-of-their-overall-net-worth-should-be-invested-initially
- https://money.slickdeals.net/articles/best-ways-to-invest-100-dollars/
- https://finance.yahoo.com/news/much-money-stock-market-age-150008787.html
- https://www.fool.com/the-ascent/buying-stocks/articles/heres-how-much-money-you-could-have-if-you-invested-1000-a-month-for-20-years/
- https://tradethatswing.com/average-historical-stock-market-returns-for-sp-500-5-year-up-to-150-year-averages/
- https://www.investopedia.com/should-you-save-your-money-or-invest-it-depends-4692975
- https://smartasset.com/retirement/how-to-save-a-million-dollars-in-20-years
- https://www.forbes.com/advisor/in/investing/is-mutual-fund-safe/
- https://finance.yahoo.com/news/11-stocks-rich-5-10-120121544.html
- https://www.quora.com/Is-it-possible-to-earn-1-000-daily-through-day-trading-or-stock-market-investments
- https://www.paytmmoney.com/blog/stock-market-investments-vs-mutual-fund-investments-which-is-better/
- https://finance.yahoo.com/news/10-best-stocks-invest-2024-200401023.html
- https://www.investopedia.com/ask/answers/04/030504.asp
- https://www.investopedia.com/articles/mutualfund/08/money-market.asp
- https://finance.yahoo.com/news/ask-advisor-am-too-im-142734001.html
- https://www.nasdaq.com/articles/passive-income:-7-ways-to-make-an-extra-$1000-a-month
- https://smartasset.com/investing/investing-100-a-month-how-much-will-you-make
- https://www.investopedia.com/ask/answers/10/mutual-funds-advantages-disadvantages.asp