A little money can go a long way in the stock market.
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.
Is investing $100 a month in stocks good? ›
The Bottom Line. Investing $100 a month adds up over time, especially with compound interest. Making small sacrifices every day to consistently add $100 to your stock investments every month will benefit you in the long run.
What if I invested $100 a month in the S&P 500? ›
$100 a month invested from age 25 to 65 is $1,176,000. You do NOT have to retire broke. A lot of people will want to argue with me on that rate of return. But here's the truth: Historically, the 30-year average return of the S&P 500 has been about 10–12%.
What stocks is The Motley Fool recommending? ›
The top 10 stocks to buy in September 2024
- CrowdStrike (CRWD 2.34%), $58 billion.
- PayPal (PYPL 0.73%), $66 billion.
- Airbnb (ABNB 0.73%), $72 billion.
- Shopify (SHOP 4.91%), $89 billion.
- MercadoLibre (MELI 1.4%), $96 billion.
- Walt Disney (DIS -0.09%), $156 billion.
- Intuitive Surgical (ISRG 1.38%), $165 billion.
The numbers may surprise you -- in a good way
I'm here to tell you that you can accumulate a large retirement nest egg even if you never contribute more than $100 a month to an IRA or 401(k) plan. In fact, if you invest $100 a month over 40 years, you could end up with a portfolio worth $531,000.
How much is $100 a month for 5 years? ›
You plan to invest $100 per month for five years and expect a 6% return. In this case, you would contribute $6,000 over your investment timeline. At the end of the term, your portfolio would be worth $6,949. With that, your portfolio would earn around $950 in returns during your five years of contributions.
How much money 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 invest $100 dollars to make $1 000? ›
10 best ways to turn $100 into $1,000
- Opening a high-yield savings account. ...
- Investing in stocks, bonds, crypto, and real estate. ...
- Online selling. ...
- Blogging or vlogging. ...
- Opening a Roth IRA. ...
- Freelancing and other side hustles. ...
- Affiliate marketing and promotion. ...
- Online teaching.
Investing $1,000 per month for 30 years at a 6% rate of return hypothetically will give you an investment portfolio worth more than $1 million. This result is hypothetical because it doesn't take into account taxes, fees, varying rates of return and other variables, such as extended market downturns.
What if I save $100 a month for 18 years? ›
If you save $100 a month for 18 years, your ending balance could be $35,400.
See the 10 stocks »
Keithen Drury has positions in Alphabet, Amazon, MercadoLibre, Meta Platforms, Salesforce, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, MercadoLibre, Meta Platforms, Salesforce, and Taiwan Semiconductor Manufacturing.
Will stocks do better in 2024? ›
The S&P 500 generated an impressive 26.29% total return in 2023, rebounding from an 18.11% setback in 2022. Heading into 2024, investors are optimistic the same macroeconomic tailwinds that fueled the stock market's 2023 rally will propel the S&P 500 to new all-time highs in 2024.
What's the next big thing to invest in? ›
The tech space is always worth watching when it comes to seeking out the next big thing in investing. Right now it seems that artificial intelligence (AI) is driving that bus and will be for the foreseeable future.
Is investing $100 a month good? ›
On average, the stock market yields between an 8% to 12% annual return. 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.
How much money do I need to invest to make $4000 a month? ›
Receiving $4,000 per month translates into an annual total of $48,000, excluding the need to pay any income taxes. With a 4% dividend yield, it'd take a required portfolio size of $1.2 million to make that cash flow of $48,000. Of course, having a higher dividend yield would mean less of a required nest egg.
How much will $10,000 be worth in 20 years? ›
The table below shows the present value (PV) of $10,000 in 20 years for interest rates from 2% to 30%. As you will see, the future value of $10,000 over 20 years can range from $14,859.47 to $1,900,496.38.
How much money should you invest in stocks per month? ›
Although that percentage can vary depending on your income, savings, and debts. “Ideally, you'll invest somewhere around 15%–25% of your post-tax income,” says Mark Henry, founder and CEO at Alloy Wealth Management. “If you need to start smaller and work your way up to that goal, that's fine.
Is $100 too little to invest? ›
Investing just $100 a month can actually do a whole lot to help you grow rich over time. In fact, the table below shows how much your $100 monthly investment could turn into over time, assuming you earn a 10% average annual return.
Is $50 a month enough to invest? ›
Contributing $50 a month to an investment account can help create impressive savings, even at a moderate 5% annual growth. It's a common myth that you need a few thousand dollars to begin investing.
What is the average best month for stocks? ›
S&P 500 best and worst months over the last 20 years (2004-2023)
- Best Months: March, April, May, July, October, November, and December.
- Worst Months: January, June, and September.
