Do you have $25,000? Would you like to turn it into $436,235? Well, the stock market can do that for you — and it can powerfully increase the value of just about any investment, whether it’s $25,000 or $2,500, or just $250.
Here’s a look at how it can happen — for you and anyone else.
Image source: Getty Images.
It’s all math
It really is all about math — and not very complicated math, either. The stock market’s average annual return over many decades is close to 10%, though over shorter periods (like 20 years), it can be much higher or lower. So if you invest $25,000 in the stock market and average a 10% annual return, your investment will grow in value to $436,235 over 30 years.
The following table shows how it happens:
Over This Period, Growing at 10%:
$25,000 Will Grow to:
5 years
$40,263
10 years
$64,844
15 years
$104,431
20 years
$168,187
25 years
$270,868
30 years
$436,235
35 years
$702,561
40 years
$1,131,481
45 years
$1,822,262
50 years
$2,934,771
55 years
$4,726,479
60 years
$7,612,041
Source: Calculations by author.
You can’t count on averaging 10%, though, so let’s be a bit more conservative. The following table reflects growth at 8% annually:
Over This Period, Growing at 8%:
$25,000 Will Grow to:
5 years
$36,733
10 years
$53,973
15 years
$79,304
20 years
$116,524
25 years
$171,212
30 years
$251,566
35 years
$369,634
40 years
$543,113
45 years
$798,011
50 years
$1,172,540
55 years
$1,722,846
60 years
$2,531,427
Source: Calculations by author.
Growing at 8%, you’ll only reach $251,566 in 30 years. Still, that can be quite a useful sum in retirement. And there’s a chance, of course, that you might average 12% or more over your particular investing period. Go ahead and aim high, but don’t assume that great returns are in any way guaranteed.
Image source: Getty Images.
How can you amass $436,235 yourself?
So how can you achieve the results above? Clearly, $25,000 in your hand and 30 years may do it. Be sure that you’re targeting annual returns that at least roughly match the stock market’s average, though — something that’s easy to do if you invest in low-cost, broad-market index funds.
For most investors, index funds are the best choice because they’re extremely easy to invest in and require little attention. Your money will simply be spread out across lots of companies immediately, giving you diversification and a chance to earn roughly the market’s return.
If you don’t have $25,000 ready to invest, that’s OK — because you can achieve the sums above with far less if you make regular investments in the stock market. Check out the following table:
Growing at 8% for:
$5,000 Invested Annually
$10,000 Invested Annually
$15,000 Invested Annually
5 years
$31,680
$63,359
$95,039
10 years
$78,227
$156,455
$234,682
15 years
$146,621
$293,243
$439,864
20 years
$247,115
$494,229
$741,344
25 years
$394,772
$789,544
$1.2 million
30 years
$611,729
$1.2 million
$1.8 million
35 years
$930,511
$1.9 million
$2.8 million
40 years
$1.4 million
$2.8 million
$4.2 million
Calculations by author.
Simply investing $5,000 each year can get you almost to that $436,235 in only 25 years, not 30 — and investing $10,000 annually can exceed $436,235 in only 20 years. Investing $15,000 annually — which might be very doable, especially if yours is a two-income household — can exceed $436,235 in only 15 years.
There are two more things you’ll need if you really want to achieve that $436,235 (or more!): patience and determination. Patience is necessary because the big growth in your account will happen in the later years. A glance at any of the tables above will confirm that in the first few five-year periods, your account will grow by tens of thousands, and in the later ones, by hundreds of thousands.
Determination is also necessary because without it, you can lose interest, lose faith in the process, or just procrastinate when it comes to investing annually. Believe in your retirement plan and stick with it. It might help to automate some of your investing, too.
10 stocks we like better than Walmart
When our award-winning analyst team has an investing tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now… and Walmart wasn’t one of them! That’s right — they think these 10 stocks are even better buys.
Stock Advisor returns as of 6/15/21
The Motley Fool has a disclosure policy.
