By deploying this strategy, you won't need to care about the latest stock news or other developments. The key is to keep it simple.
Making money in the stock market doesn't have to be difficult or complicated. It can get that way, however, if you try to get too greedy or aggressive. If you're willing to stay the course and buy and hold investments that you're willing to be patient with, it's not impossible by any means to grow a $10,000 portfolio to $1 million or more by the time you retire.
Below, I'll show you how you can achieve that without even having to take on much risk, either, or worrying about which stocks to pick.
Why an exchange-traded fund makes the most sense for most investors
Investing can be intimidating because there are many stocks to choose from. Looking at tech giants like Amazon, Microsoft, and Apple, you might be thinking that it's hard to pick which one (or all) of those stocks you should buy. While you might want to own a dozen or more stocks in order to diversify, you may not have the time to track all those companies to see how they are doing and whether they are still good investments.
If you invest in an exchange-traded fund (ETF), you can get exposure to hundreds of different stocks -- even thousands -- through a single investment. This is why ETFs can drastically simplify your investing strategy. If you set up a goal to invest every month, you can put that money into the same ETF rather than going through a whole exercise every month of deciding which stock is the best buy at that precise moment.
One fund that should be near the top of all ETF buy lists is the Invesco QQQ Trust (QQQ 0.95%). It gives you exposure to the top 100 non-financial stocks on the Nasdaq. And the Nasdaq is where you want to be in the long run, because this exchange is where many of the best and brightest growth stocks end up. This includes Amazon, Microsoft, Apple, and many others. While you can invest in a broader-based S&P 500 index, the danger with diversifying too much is that you could end up sacrificing some gains for the added safety. And as long as you have an extended time horizon (e.g., 20-plus years), the Invesco QQQ Trust can be an excellent option.
How $10,000 can grow to $1 million
Over the past 10 years, the Invesco QQQ Trust has generated total returns (which include dividends) of 450%. That averages out to a compound annual growth rate of 18.6%. The S&P 500's long-term average is around 10%. By focusing on the Nasdaq's top 100 stocks, you have the potential to generate far superior returns in the long run.
Let's assume, however, that over a much longer period of 20- or 30-plus years, the return from the Invesco QQQ Trust decreases from 18.6% to 15%. After all, stocks have been a bit hot lately, and gains are likely to cool down in the future. Yet 15% is still an extraordinary return even for Nasdaq growth stocks. Here's a look at how a $10,000 investment could increase over the years, assuming a 15% annual growth rate.
| Year | Investment Balance |
|---|
| 10 | $40,456 |
| 15 | $81,371 |
| 20 | $163,665 |
| 25 | $329,190 |
| 30 | $662,117 |
| 33 | $1,006,998 |
Calculations by author.
Due to the effects of compounding, there's a huge advantage in keeping your money invested. Between years 10 and 20, the portfolio balance in this example rose by approximately $123,000. But between years 30 and 33, with a much bigger balance, it increased by nearly $345,000. The power of compounding is what makes investing in growth-focused ETF a worthwhile option.
Staying invested is the key
If you watch stock market news, much of the hype these days is about what the Fed will do with respect to interest rates, and what impact that will have on stocks. If you're a long-term investor, the huge advantage you have is you can ignore all that as nothing but noise and developments that will only have an impact on the short term.
In many cases, the best option is to keep things simple. Invest in what you know, and if you aren't comfortable with any particular stock, buy a top ETF like the Invesco QQQ Trust. That's a better, safer way of growing your wealth over the years than trying to keep up with the latest business news every day.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, and Microsoft. The Motley Fool recommends Nasdaq and 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
If you're willing to stay the course and buy and hold investments that you're willing to be patient with, it's not impossible by any means to grow a $10,000 portfolio to $1 million or more by the time you retire.
What is the rule of 72 Motley Fool? ›
Let's say that you start with the time frame in mind, hoping an investment will double in value over the next 10 years. Applying the Rule of 72, you simply divide 72 by 10. This says the investment will need to go up 7.2% annually to double in 10 years. You could also start with your expected rate of return in mind.
How to invest $1,000 dollars and double it? ›
Here's how to invest $1,000 and start growing your money today.
- Buy an S&P 500 index fund. ...
- Buy partial shares in 5 stocks. ...
- Put it in an IRA. ...
- Get a match in your 401(k) ...
- Have a robo-advisor invest for you. ...
- Pay down your credit card or other loan. ...
- Go super safe with a high-yield savings account. ...
- Build up a passive business.
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.
How long does it take to turn $10000 into $100000? ›
If you're saving $10,000 a year and have an additional $7,100 you can put into savings, Singh said a high-yield savings account with a 4% interest rate could take you to $100,000 in 10 years.
How to turn 10K into 100k in 1 year? ›
How to Turn 10k into 100k in a Year?
- Invest in stocks (try Acorns now)
- Start blogging (click here for the best blogging platform)
- Write an email newsletter (here's my recommendation for the best email marketing software)
- Start an online business (Shopify makes it easy)
- Flip stuff.
It states that you can comfortably withdraw 4% of your savings in your first year of retirement and adjust that amount for inflation for every subsequent year without risking running out of money for at least 30 years.
What is Rule 69 in investment? ›
What is the Rule of 69? The Rule of 69 is used to estimate the amount of time it will take for an investment to double, assuming continuously compounded interest. The calculation is to divide 69 by the rate of return for an investment and then add 0.35 to the result.
What is the Rule of 72 Warren Buffett? ›
The rule of 72 is a shortcut investors can use to determine how long it will take their investment to double based on a fixed annual rate of return. All you do is divide 72 by the fixed rate of return to get the number of years it will take for your initial investment to double.
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.
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 to make $1000 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.
How to become a millionaire in 5 years? ›
Here are seven proven steps to get you wealthy in five years:
- Build your financial literacy skills. ...
- Take control of your finances. ...
- Get in the wealthy mindset. ...
- Create a budget and live within your means. ...
- Step 5: Save to invest. ...
- Create multiple income sources. ...
- Surround yourself with other wealthy people.
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.
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 invest $100 000 to make $1 million? ›
4 Ways To Grow $100,000 Into $1 Million for Retirement Savings
- An S&P 500 index fund. An S&P 500 index fund isn't going to provide market-beating returns, but it will ensure that you don't fall behind the average. ...
- Growth stocks. ...
- Dividend stocks. ...
- Small-cap value stocks.
As a result, 1000 thousand equals one million.
How much income will $1 million generate? ›
Saving a million dollars is a big achievement, but many Americans fear it won't be enough. One rule of thumb suggests $1 million would generate around $40,000 each year, adjusted upward for inflation. Instead of picking a figure, work out what income you might need in your old age and work backward from there.
How many times do you need to double $1 to get to a million? ›
Final answer: It takes 19 doublings for $1 to become $1,000,000.
