It doesn't matter how much money you have now — you can be a millionaire. All that matters is how patient you are and you buy.
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Even if you only have $1 and never invest another penny, you can be a millionaire in 30 years. It's just that you'd need to hit a home run S&P 500 stock — which returns at least 58.5% — each year.
That's a tall order, yes. But it's actually been possible this year. Six stocks in the S&P 500, including Nvidia (NVDA), Meta Platforms (META), Royal Caribbean (RCL), Advanced Micro Devices (AMD), Tesla (TSLA) and Carnival (CCL), all gained more than enough this year to meet that threshold.
Clearly, doing this every year isn't easy. The S&P 500 typically only returns about 10% a year on average over time. But there are other levers you can pull to hit a million in just three decades.
Making Of S&P 500 Millionaires
If it's possible to turn a mere buck into a million dollars, it's not hard to image how much easier it could be if you get a bit more aggressive.
Starting with more money or investing more cash annually takes the pressure off how many home run stocks you need to buy to hit a million.
Let's say you start off with $1 but contribute just $1,000 a year. In that case, you'd only need to find stocks that return 19.2% annually to be a millionaire in 30 years. That's still double the S&P 500's typical return. But much more doable than a 58.5% annual return if you don't keep investing. This year, 72 stocks in the S&P 500 are up that much or more.
But here's where the magic happens. Boost that annual investment to $10,000 and you'd only need a 7.3% annual return to be a millionaire in 30 years — even if you started out with just $1. That's actually more than possible and could be pulled off with a moderately aggressive portfolio.
How The Rich Get Richer
Given how you can turn a dollar into a million, you can only imagine what's possible when you start with a larger sum.
Just put away $10,000 and never save another dime and you'll be sitting on a million dollars in 30 years if you can pick a stock that returns 16.6% annually. If that's too tough, just add $10,000 annually to your investments and you'll be a millionaire in 30 years if you only get a historically easy-to-reach 6.9% annual return on your money.
Likewise, the hurdles to a million drop fast as you start with larger sums. Start with $500,000 or $750,000 and you only need a 2.3% or 1.0% annual return, respectively, to wind up with a million.
Start with $750,000 and add another $10,000 a year? You can actually lose money on your portfolio and still end up with a million in 30 years.
Given that interest rates on savings accounts are hovering around 4% now, you can see why so many rich people are happy sitting on cash.
Is A Million Bucks Enough?
There's one other major caveat though. Having a million dollars in 30 years isn't the same as having it now. Inflation, which has been running hot for months, eats into the value of money.
In fact, having a million dollars in 30 years ago is like having $2.1 million today, thanks to cumulative inflation of nearly 110% during that time. That means if in 30 years you want to feel as posh as a millionaire does today, you'd need to actually aim for more than $2 million.
What kind of stock would turn $1 into that in 30 years with no annual contribution? One that returns 62% annually. For investors who own Nvidia, up nearly 160% this year, that looks more than doable. But can Nvidia keep that up for 30 years? And if not, can investors find the S&P 500 stock that does each year?
Now, that's a little tougher.
How To Be A Millionaire
It's easier than it sounds
| Start with | Annual contribution | Annual return needed to hit a million* |
|---|---|---|
| $1 | $0 | 58.5% |
| $1 | $10,000 | 7.3% |
| $10,000 | $0 | 16.6% |
| $10,000 | $10,000 | 6.9% |
| $100,000 | $0 | 8.0% |
| $100,000 | $10,000 | 4.6% |
| $250,000 | $0 | 4.7% |
| $250,000 | $10,000 | 2.7% |
| $500,000 | $0 | 2.3% |
| $500,000 | $10,000 | 0.9% |
| $750,000 | $0 | 1.0% |
| $750,000 | $10,000 | -0.2% |
Sources: IBD, S&P Global Market Intelligence, *- over 30 years compounded annually
Follow Matt Krantz on Twitter @mattkrantz
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