Breaking News
Investing Pro 0
Free Webinar - The Role of Psychology in Trading - Thursday, December 8, 2022 | 04:00PM EST Enroll Now

Fact Check: How Long Would It Take To Become A Millionaire Via The Stock Market?

By Investing.com (Clement Thibault/Investing.com )Stock MarketsMay 21, 2019 03:37AM ET
www.investing.com/analysis/fact-check-200423312
Fact Check: How Long Would It Take To Become A Millionaire Via The Stock Market?
By Investing.com (Clement Thibault/Investing.com )   |  May 21, 2019 03:37AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
US500
+0.66%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

The holy grail question of investing: Is it really possible to become a millionaire by investing in the stock market, and if so, under what circumstances?

While many people are attracted to the stock market by the potential for profits and return on capital with very little effort, it's never a sure thing. Many financial advisors, banks, and financial education providers, have an incentive to promote the idea that one can get rich by investing in the stock market. Their livelihood depends on attracting potential customers, and sometimes promotional materials can be misleading.

In addition to the well-intentioned professionals, there are also professional scammers, who promise impossible returns in a short amount of time only to run off with your money.

So, after taking all that into account, what chance is there of making a million on the equity markets? Today we take a look at how long it might take, and how much ready investing cash would be needed to reach that magic 7-figure number via the stock market.

Can A 'Regular Joe' Become A Millionaire?

First, we’ll focus on the total performance of the S&P 500, the leading U.S. large-cap index. Extensive research has shown that out-performing the S&P 500 over a long time period is very hard, and we’re interested in seeing whether any ‘Regular Joe’ can become a millionaire. We’ll reinvest all dividend payments in the market.

Second, we have to make certain assumptions on stock market returns based on past performance. As many disclaimers state, past performance is not indicative of future performance, but for our theoretical exercise, it’ll do.

Third, we’ll invest as part of our IRA, or in other words - we will not take taxes into account. We’ll also adjust the returns to inflation, to make sure we have a million dollars in purchasing power, and not just a nominal million.

As you can see, this seemingly simple yes or no question requires quite a bit of mental gymnastics, and we even haven’t gotten to the math part yet.

How Fast Can Investments Grow?

Over the past 70 years, the S&P 500’s compound annual growth rate (CAGR) is 7.56%, after adjusting for inflation and reinvesting dividends. Essentially, this means that over the past 70 years you could replace all the bubbles, crashes and inflation in a steady 7.56% growth a year, and get to the exact point we are at today.

Based on this rate, we can now calculate how fast someone can get to a million dollars based on three variables: the initial amount invested, an additional annual investment, and the years the money would take to compound.

Let’s start with an easy example. With only an initial investment of $1,000 and a CAGR of 7.56%, it would take you 95 years to cross the $1 million threshold. With only $1,000, you can create a millionaire 5 generations from now. That’s nice, but not exactly what we're after. With an initial investment of $10,000, it would take you 64 years to reach $1 million. Again, not great.

How Much To Invest?

The question then becomes, how big of an initial investment do you have to make to become a millionaire in more reasonable timeframes, say - 10, 20, 30, and 40 years.

To become a millionaire within 10 years, you’d need to invest a hefty $485,000. You’ll need about $235,000 to make it in 20 years, $115,000 to make it in 30 years, and $55,000 to make it in 40 years.

Now, let’s evaluate a far more common scenario, of a smaller initial investment with annual additions. Again, let’s start on the low end of the spectrum.

If you can make an initial investment of $1,000 and invest another $1,000 yearly ($83 a month), it’ll take you 58 years to amass a million dollars. Not great, but a lot better than the 95 years we previously needed. Similarly, with an initial investment of $10,000 and a yearly addition of $3,000 ($250 a month), it’ll take you 41 years to get to a million dollars.

For those of us with no initial investment but more money to spare on a monthly basis, you can become a millionaire by investing $1000 every month for 27 years. Over those 27 years, you’d have invested $324,000 and earned $726,000 from the stock market. Add an initial investment of $100,000, and you can shave 7 years off and become a millionaire in 20 years.

Lastly, if you have $100,000 and $25,000 to invest every year, you’ll get to a million dollar in exactly 15 years.

All The Options

Here’s a summary table with the many options we’ve covered:

Summary Table
Summary Table

Becoming a millionaire by investing in the stock market is possible, but it’ll take time. There are no shortcuts to wealth, and it must be accumulated and compounded over time. Unsurprisingly - the more money you have, the faster you’ll get to the coveted threshold.

Fact Check: How Long Would It Take To Become A Millionaire Via The Stock Market?
 

Related Articles

Fact Check: How Long Would It Take To Become A Millionaire Via The Stock Market?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (15)
Dave Glider
Dave Glider Jul 04, 2019 3:30PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I'm more interested in how much do I need to earn 8k per month.Any additional returns and left over would go back into the fund.
C Am F G
C Am F G May 23, 2019 2:57PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Yes, but if you really want to start using that money, you must sell your investments and at least where I live the taxes for those winnings would be about 35%, so in fact you would need to have at least 1,5 million to actually become a millionaire after you sell.....
Solomon Lalani
Solomon May 22, 2019 11:58PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
With a reasonable day-trading plan, and eyeing 1% return per day, on an account size of 10,000, you can become millionaire in 540 days (2 years, 270 trading days / year). Formula 10,000 x 1.01^540 = 2.15m.  Assume you had half of these as bad days and half of these days you reached your target.  Forex account with high leverage and hedging possibilities work the best.  Discipline is the most important one in this: stick to a fewer instruments you understand (and know at the back of your hands), cut your losses (now that's critical) and let your profits run.
Gustavo Cervantes
Gustavo Cervantes May 22, 2019 11:58PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
you cant day trade with $10000. a minimum of $25000 is necessary
HelliumStar ..
HelliumStar .. May 22, 2019 4:43PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Just change game that you play (regular stock equity like S&P500 market) with FX market insted! And if you are self-control, smart and not moneygrubbing guy you should become millioner in short period of time!
Nj Paust
Nj Paust May 21, 2019 6:21PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Nice article BUT I know of a handful of dividend stocks that turned 10 grand into over 7 figs over the last 23 years based on CAGR. Just AMZN alone would have made you a MULTI-millionaire.
Romy Romeo
Romy Romeo May 21, 2019 3:07PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Lesson learned: Stock trading is more profitable than investing
Nj Paust
Nj Paust May 21, 2019 3:07PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Faster profits with low float stocks and parabolic volume spikes.
Michael Bilin
Michael Bilin May 21, 2019 1:48PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
If you invested in amazon 2000 dollars you would a millioner in 20 years
Boon Sin Thye
Boon Sin Thye May 21, 2019 12:38PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
atlease.yes.
Charles Clymer
Charles Clymer May 21, 2019 11:57AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
You can day trade futures and not be subject to pattern day trading.
I am confused
I am confused May 21, 2019 11:56AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
nice article Mr.Thinault. I have a question. do you take recession into consideration for this?
Mario Valenzuela
Mario Valenzuela May 21, 2019 11:56AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Jim Gregory, he explains he takes inflation into account, and Recessions and Boom markets even out.
I am confused
I am confused May 21, 2019 11:56AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
thanks Mario
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email