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 -0.44%). 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
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.
How To Turn 10K Into 100K In One Year? If you only have one year to flip 10k into 100k, you can try ideas like flipping stuff for profit or flipping online businesses. Similarly, starting your own online business could be the fastest way to make 100k from 10k.
How much do I need to invest to make $1000000? ›
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.
What is the 4% rule Motley Fool? ›
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.
How to flip 1000 dollars fast? ›
How To Flip $1,000 Dollars
- Buy And Resell Clothing. ...
- Invest In Real Estate. ...
- Buy & Sell Collectibles. ...
- Start An Online Business. ...
- Rent Out Assets. ...
- Amazon FBA. ...
- Invest In Dividend-Paying Stocks & ETFs. ...
- Stake Crypto.
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 long will it take you to double your money if you invest $1000 at 8% compounded annually? ›
The result is the number of years, approximately, it'll take for your money to double. For example, if an investment scheme promises an 8% annual compounded rate of return, it will take approximately nine years (72 / 8 = 9) to double the invested money.
Can you turn 10k into a million? ›
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.
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.
Can you live off interest of $1 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 much money do I need to invest to make $3,000 a month? ›
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 money do I need to invest to make $5000 a month? ›
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.
What is the Rule of 72 in simple terms? ›
Do you know the Rule of 72? It's an easy way to calculate just how long it's going to take for your money to double. Just take the number 72 and divide it by the interest rate you hope to earn. That number gives you the approximate number of years it will take for your investment to double.
What is the Rule of 72 in trading? ›
The Rule of 72 is a calculation that estimates the number of years it takes to double your money at a specified rate of return. If, for example, your account earns 4 percent, divide 72 by 4 to get the number of years it will take for your money to double. In this case, 18 years.
What is the Rule of 72 Warren Buffett? ›
The Rule of 72:
This rule is determined by dividing 72 by the annual rate of return. For instance, if you anticipate a 10% annual return on your investment, it would take roughly 7.2 years (72 divided by 10) for your initial investment to double.
Does the Rule of 72 really work? ›
The Rule of 72 is reasonably accurate for low rates of return. The chart below compares the numbers given by the Rule of 72 and the actual number of years it takes an investment to double. Notice that although it gives an estimate, the Rule of 72 is less precise as rates of return increase.
