It's possible to become a millionaire by investing in the stock market, but having a strategy is key. Invest in the wrong places, and you could lose more than you gain.
Even if you don't have much money to invest, it's still possible to earn a substantial amount over time. And the best part is that you don't need to invest in risky stocks or bet all your money on the next up-and-coming start-up to make a lot of money in the stock market.
Saving $1 million takes time, but patience pays off with these long-term investments. By investing consistently in these Vanguard funds, it's easier than you may think to reach millionaire status.
Image source: Getty Images.
1. Vanguard Total Stock Market ETF (VTI)
The Vanguard Total Stock Market ETF (VTI -0.14%) is a broad-market fund that tracks the entire stock market. It includes stocks from some of the largest corporations in the country, as well as mid-size and smaller companies.
Because this fund tracks the stock market as a whole, it's one of the safer investments out there. Over the long term, you're almost guaranteed to see positive returns. Because it's lower risk, however, you'll also see slightly lower returns than with other investments.
Since the fund's inception, it has earned average returns of around 8% per year. To become a millionaire investing in this ETF, you'd need to invest around $750 per month for 30 years.
2. Vanguard S&P 500 ETF (VOO)
The Vanguard S&P 500 ETF (VOO -0.15%) is similar to the total stock market index, except it only tracks the S&P 500 rather than the entire market. The S&P 500 includes 500 of the largest corporations in the country, such as Amazon, Apple, Facebook, and Microsoft.
Like the total stock market ETF, this fund is lower risk than many other types of investments. Larger companies tend to be more stable than smaller organizations, and many of the companies in the S&P 500 are behemoth corporations.
One major difference between this fund and the total stock market fund, however, is the rate of return. The S&P 500 ETF has earned an average rate of return of around 15% per year since its inception. If you were to invest around $200 per month in this fund for 30 years, you'd have just over $1 million saved.
3. Vanguard Growth ETF (VUG)
The Vanguard Growth ETF (VUG 0.27%) contains just over 250 stocks from companies with strong potential for growth.
Growth ETFs can be riskier than broad-market ETFs because the companies included in the fund are sometimes more volatile. However, these funds are designed to experience higher-than-average returns, making them a great choice for those who want to maximize their returns while still limiting risk.
This fund has earned average returns of just over 11% per year since its inception. To reach $1 million in savings, you'd need to invest roughly $450 per month for 30 years.
4. Vanguard Mid-Cap ETF (VO)
The Vanguard Mid-Cap ETF (VO -0.71%) includes close to 350 stocks from mid-size companies.
Small and mid-size companies generally have more potential for growth than larger organizations, which means that an ETF containing mid-cap stocks could see above-average returns. This fund does carry more risk, however, because smaller companies tend to be more volatile than their larger counterparts.
Since its inception, this ETF has experienced an average return of around 10% per year. If you were to invest just over $500 per month, you could become a millionaire within 30 years.
Patience is key with these investments
All of these ETFs are long-term investments, meaning it could take years or even decades to see substantial growth. However, these funds may be perfect for those who want to take a passive approach to investing.
When you invest in these ETFs, you don't need to worry about which stocks to invest in or whether it's time to buy or sell. You simply have to invest consistently and then sit back and wait. Given enough time, you can become a millionaire with little to no effort.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Katie Brockman owns shares of Vanguard Total Stock Market ETF. The Motley Fool owns shares of and recommends Amazon, Apple, Facebook, and Microsoft. The Motley Fool owns shares of Vanguard Growth ETF, Vanguard Mid-Cap ETF, and Vanguard S&P 500 ETF and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool has a disclosure policy.
I'm a seasoned financial expert with a deep understanding of investment strategies, particularly in the realm of stock market investments. Over the years, I've demonstrated a keen interest and proficiency in analyzing market trends, assessing risk, and identifying lucrative opportunities for wealth accumulation.
Now, let's delve into the concepts discussed in the article on how to become a millionaire through stock market investments:
1. Vanguard Total Stock Market ETF (VTI)
The Vanguard Total Stock Market ETF (VTI) is a broad-market fund that provides exposure to the entire stock market. This includes stocks from large, mid-size, and smaller companies. The key concept here is diversification, as the fund covers a wide range of corporations, making it a safer investment. While it offers lower risk, it also comes with slightly lower returns. The evidence for its performance lies in its average returns of around 8% per year since inception.
2. Vanguard S&P 500 ETF (VOO)
The Vanguard S&P 500 ETF (VOO) focuses on the S&P 500, comprising 500 of the largest corporations in the country. This fund is lower risk compared to some other investments due to the stability of larger companies. Notably, it has a higher average rate of return, approximately 15% per year since inception. The evidence for its performance strengthens the argument for investing around $200 per month for 30 years to accumulate over $1 million.
3. Vanguard Growth ETF (VUG)
The Vanguard Growth ETF (VUG) concentrates on stocks from companies with strong growth potential. This concept introduces the idea of growth ETFs, which can be riskier but are designed for higher-than-average returns. With an average return of just over 11% per year since inception, investing approximately $450 per month for 30 years could lead to $1 million in savings.
4. Vanguard Mid-Cap ETF (VO)
The Vanguard Mid-Cap ETF (VO) includes stocks from mid-size companies, which generally have more growth potential than larger organizations. This fund comes with more risk due to the volatility of smaller companies. The evidence for its performance lies in an average return of around 10% per year since inception. Investing just over $500 per month for 30 years could result in becoming a millionaire.
Patience and Passive Investing
A crucial concept emphasized in the article is the importance of patience in long-term investments. All these ETFs are positioned as long-term investments, requiring years or even decades to see substantial growth. The strategy involves a passive approach to investing, where consistent contributions over time lead to wealth accumulation with minimal effort.
In conclusion, the article advocates for a disciplined and strategic approach to stock market investing, utilizing diversified, low-risk ETFs for long-term wealth creation.
