Becoming a millionaire may seem like hard work. But the reality is that, while there’s some sacrifice involved, you typically don’t need a ton of money or investing prowess to amass a seven-figure nest egg — especially if you leave yourself plenty of time to do it.
In fact, with just one monthly investment, you should be able to achieve millionaire status. Here’s what you’d need to do in order to make that happen.
Take this one simple step to become a millionaire
If you want to make one single monthly investment and end up a retirement millionaire, you most likely can do that by investing in an S&P 500 index fund. This type of fund gives you a small ownership stake in all of the 500 or so companies making up the Standard & Poor’s 500. That’s a market index widely viewed as a barometer of the overall stock market, and it tracks the performance of America’s largest businesses.
An S&P 500 index fund is almost sure to help you build a seven-figure nest egg over time because it has a very consistent performance track record and offers instant diversification, since you’ll own so many different types of companies after buying the fund. It’s consistently produced 10% average annual returns and never produced losses for any long-term investor who kept their money in it for at least 20 years — regardless of when they first bought in.
The only big variable with this approach is how much you must invest in order to hit millionaire status. That amount depends on your investing timeline. The table below shows the amount you’d need to put into this type of fund every month, depending on how long you have until you must reach your millionaire goal and assuming you earn 10% average annual returns.
If you want to become a millionaire retiree in this many years
Invest this much each month in an S&P fund
Remember, if you have a short timeline, there is a much greater risk of not meeting your target, since the S&P does have some down years and doesn’t provide a 10% return every year. If you’re investing only for a short period, it’s very possible you could have poor timing that leaves you with less. And, of course, with a short investing timeline, your monthly investment must be much higher to even have a chance at amassing a million-dollar fortune, since you have less opportunity for your money to grow.
That’s why it pays to begin investing ASAP — especially as you aren’t going to beat the market by putting money into an S&P 500 fund, as you might if you purchase individual stocks. The later you get started investing, the more financial sacrifices you’re likely to have to make to ensure your money grows to a balance of a million or more so you can enjoy the secure retirement you deserve.
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