If you want to become a millionaire, investing money can help make that happen. If you open a brokerage account and begin buying assets that provide a generous return, the money your investments earn can be reinvested and earn even more for you. This is called compound growth, and it’s a powerful wealth-building tool.
But just how quickly can investing make you a millionaire? Here’s what you need to know.
Here’s how fast you can become rich by investing
The timeline for how fast investing can make you rich is going to depend on two factors: how much you invest and the returns you earn when you do it. The table below shows when you’ll end up with $1 million in your brokerage account based on these two factors.
| Annual Investment | 4% Return | 8% Return | 10% Return |
|---|---|---|---|
| $2,000 | 78 years | 49 years | 42 years |
| $5,000 | 57 years | 37 years | 32 years |
| $10,000 | 42 years | 29 years | 26 years |
| $20,000 | 29 years | 21 years | 19 years |
Data source: Author’s calculations
As you can see, finding more spare cash to transfer from your bank account to your brokerage account makes a huge difference in your timeline for becoming a millionaire. But so does the return you get on your invested funds.
So if you want to amass a seven-figure nest egg as quickly as you can, you’ll need to both invest as much as possible and be smart about what you put your money into.
How to free up more cash to invest and find the right investments
If you want to become a millionaire ASAP, you’ll need to work on finding more money to invest. You can often do this by:
- Taking on a side job such as driving for a rideshare company, walking dogs, or babysitting, depending where your strengths are.
- Negotiating for a higher salary. You can ask for more money when you’re hired, request a raise at a performance review, or look for a better-paying job.
- Working overtime if your company allows you to do so.
- Making a budget that prioritizes investing and cuts discretionary spending.
- Keeping fixed expenses low, such as by switching to a cheaper used car instead of buying a new one and investing the money saved.
You’ll also need to find the right investments. For some people, this means investing in shares of stock in individual companies. This approach can pay off big time if the company happens to perform well, but it requires a lot of specialized knowledge as well as time to research investments. It’s also riskier.
Alternatively, you could invest in index funds, such as an S&P 500 index fund. Index funds track the performance of a financial index, with the S&P 500 index tracking the performance of around 500 of the largest companies in the U.S.
Since index funds spread your money around many different investments, there’s a reduced risk of loss, and they are much easier to invest in as you don’t need to independently evaluate each company. However, the potential returns aren’t as high as buying individual stocks because your money is spread among so many businesses.
Ultimately, you’ll need to decide how much risk you’re willing to take on in search of higher returns. But remember that investing more and investing smartly can go a long way toward making you a millionaire much faster, so sacrificing a little to do these things can be a wise financial move.