Investing in the stock market is one of the most effective ways to generate long-term wealth, but it can be daunting -- especially if you're a beginner.
The good news, though, is that you don't need to be a stock market expert or have thousands of dollars per month to invest. In fact, with just $100 per month, you could potentially build a portfolio worth $325,000 or more. Here's exactly how to get there.
Choosing the right investments
Where you invest is far more important than how much you can afford to invest each month. If you're investing in shaky stocks, it doesn't matter how many thousands of dollars you're contributing -- you could still lose far more than you gain.
Image source: Getty Images.
If you're willing to put in some time and effort, investing in individual stocks could be a smart strategy. This approach requires a bit of research to ensure you're buying quality companies, but if done well, you're much more likely to earn above-average returns over time.
Individual stocks aren't the only way to invest, however. If you're looking for a more effortless option, broad-market ETFs -- such as an S&P 500 ETF -- can be a better fit. Each ETF contains dozens or even hundreds of stocks, providing instant diversification with next to no effort on your part.
S&P 500 ETFs, in particular, can be a good fit for risk-averse investors looking for a low-maintenance investment. This type of fund tracks the S&P 500 index itself, containing stocks from all 500 companies within the index. S&P 500 ETFs are among the lowest-risk funds, and you're all but guaranteed to see positive returns over the long haul.
Building a $325,000 portfolio
The returns you earn will depend largely on where you invest. Historically, though, the market itself has earned an average annual return of around 10% per year -- meaning the annual highs and lows have averaged out to around 10% per year over several decades.
For simplicity's sake, let's assume you're investing in an S&P 500 ETF, earning a 10% average annual return. If you're investing $100 per month, here's approximately how much you could accumulate over time, depending on how many years you have to save:
| Number of Years | Total Portfolio Value |
|---|
| 20 | $69,000 |
| 25 | $118,000 |
| 30 | $197,000 |
| 35 | $325,000 |
| 40 | $531,000 |
Data source: Investor.gov. Table by author.
To reach $325,000 in total savings, you'll need to invest consistently for around 35 years. But if you have even a few more years to invest, you could potentially earn far more.
Again, these numbers assume you're earning returns in line with the market's historic average. If your investments are beating the market even slightly, it's possible to earn much more over time.
For instance, say your investments are earning a 12% average annual return compared to 10% per year. If you're still investing $100 per month, you'd have a total of around $518,000 after 35 years, compared to $325,000 in that time period with a 10% return.
There are never any guarantees in the stock market, but with the right strategy, a little cash can go a long way. By choosing the right investments and getting started as soon as possible, you could build a portfolio worth hundreds of thousands of dollars.
FAQs
If you're still investing $100 per month, you'd have a total of around $518,000 after 35 years, compared to $325,000 in that time period with a 10% return. There are never any guarantees in the stock market, but with the right strategy, a little cash can go a long way.
How much money will I have if I save $100 a month? ›
Your Retirement Savings If You Save $100 a Month in a 401(k)
If you're age 25 and have 40 years to save until retirement, depositing $100 a month into a savings account earning the current average U.S. interest rate of 0.42% APY would get you to just $52,367 in retirement savings — not great.
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See the 10 stocks
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How much will I have in 30 years if I invest $100 a month? ›
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 make a monthly investment of $200, your 30-year yield will be close to $400,000.
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According to Motley Fool, their Stock Advisor recommendations have a 72% win rate and have beaten the market by 24% annually since 2002. Third-party analysis by TipRanks found 61% of Motley Fool picks were successful over a 1-year period.
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Partners on this page provide us earnings. If you are an active and value investor, Morningstar is the perfect investment research service for you. They have extensive research on everything from mutual funds to bonds, covering more than 620,000 investments.
What stocks will double in 2024? ›
Wayfair Inc. (NYSE:W), Match Group, Inc. (NASDAQ:MTCH), and Palantir Technologies Inc. (NYSE:PLTR) are some of the stocks that will double in 2024, besides StoneCo Ltd.
In that case, investing $100 a month over 40 years will leave you with an ending balance of around $531,000. Meanwhile, you'll only be contributing a total of $48,000 to get to that point. So all told, you're looking at a $483,000 gain, which is pretty impressive.
How much per month to save $10,000 a year? ›
To reach $10,000 in one year, you'll need to save $833.33 each month. To break it down even further, you'll need to save $192.31 each week or $27.40 every day. These smaller chunks are much more realistic and simple to comprehend, making it easier to track your progress.
How much is $100 a month for 18 years? ›
Starting to save earlier could mean you'll have more saved
This chart shows that a monthly contribution of $100 will compound more if you start saving earlier, giving the money more time to grow. If you save $100 a month for 18 years, your ending balance could be $35,400.
How much do I need to save a month to get $10000? ›
“To save $10,000 in a year, you need to save approximately $833 per month,” he said. “Having a monthly target makes the goal more manageable and trackable.” If a monthly goal still feels unmanageable, try breaking it down by week.
