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 1.10%). 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 $1 million in 5 years? ›
Saving a million dollars in five years requires an aggressive savings plan. 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.
How much money do I need to invest to make $3000 a month? ›
Imagine you wish to amass $3000 monthly from your investments, amounting to $36,000 annually. If you park your funds in a savings account offering a 2% annual interest rate, you'd need to inject roughly $1.8 million into the account.
How much do I need to invest monthly to be 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 more do you need to invest per month to have $1 m at retirement? ›
The amount you need to save to retire with $1 million depends on how old you are when you start saving. If you get a 10% annual return, it ranges from $116 per month for 20-year-olds to $2,623 per month for 50-year-olds. You can save more by using tax-advantaged retirement accounts, such as 401(k)s and IRAs.
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 will it take to turn 500k into $1 million? ›
If invested with an average annual return of 7%, it would take around 15 years to turn 500k into $1 million.
How to make $3,000 a month in dividends? ›
If the average dividend yield of your portfolio is 4%, you'd need a substantial investment to generate $3,000 per month. To be precise, you'd need an investment of $900,000. This is calculated as follows: $3,000 X 12 months = $36,000 per year.
Can you live off $3,000 a month? ›
Top the amount with 401(k) savings, living on $3,000 a month after taxes is possible for a retiree. For those who only have social security benefits to rely on, there are many places where they can retire on their checks both in the USA and around the world.
How much do I need to invest to make $1,000 a month? ›
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.
Those who are able to save a significant amount beyond their retirement account contributions may be able to generate $200 monthly in interest. “If you have $50,000 in a high-yield savings account offering 5% APY, that's $200 a month right there,” Henry says.
Can I live off interest on a million dollars? ›
Once you have $1 million in assets, you can look seriously at living entirely off the returns of a portfolio. After all, the S&P 500 alone averages 10% returns per year. Setting aside taxes and down-year investment portfolio management, a $1 million index fund could provide $100,000 annually.
How to become rich in two years? ›
How To Get Rich
- Start saving early.
- Avoid unnecessary spending and debt.
- Save 15% or more of every paycheck.
- Increase the money that you earn.
- Resist the desire to spend more as you make more money.
- Work with a financial professional with the expertise and experience to keep you on track.
Retiring at 65 with $1 million is entirely possible. Suppose you need your retirement savings to last for 15 years. Using this figure, your $1 million would provide you with just over $66,000 annually. Should you need it to last a bit longer, say 25 years, you will have $40,000 a year to play with.
How much money do I need to invest to make $5000 a month? ›
To generate $5,000 per month in dividends, you would need a portfolio value of approximately $1 million invested in stocks with an average dividend yield of 5%. For example, Johnson & Johnson stock currently yields 2.7% annually. $1 million invested would generate about $27,000 per year or $2,250 per month.
How much money do you need to retire comfortably at age 65? ›
Some strategies call for having 10 to 12 times your final working year's salary or specific multiples of your annual income that increase as you age. Consider when you want to retire, goals, annual salary, expected annual raises, inflation, investment portfolio performance and potential healthcare expenses.
Can I become a millionaire in 5 years by investing? ›
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.
How long does it take to turn $100 000 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.
How long to become a millionaire investing $1,000 a month? ›
If you invest $1,000 per month, you'll have $1 million in 25.5 years.
| Monthly contribution | Time to reach $1 million with an 8% annual return |
|---|
| $500 | 33.3 years |
| $1,000 | 25.5 years |
| $2,500 | 16.3 years |
| $5,000 | 10.6 years |
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At the current Treasury rate of 4.3%, a $1 million portfolio would generate about $43,000 per year, or roughly $3,500 per month. With your Social Security payments that would generate about $6,000, again enough to live comfortably in most places.
