The stock market can be daunting at times, and the rollercoaster of ups and downs is often difficult to endure even for seasoned investors.
However, the market is also a wealth-generating powerhouse, and even small amounts of cash regularly invested in the right stocks can grow over time into a portfolio worth hundreds of thousands of dollars.
While you don't need a lot of cash to get started in the stock market, you will need the right strategy. This is exactly what it takes to turn just $50 a week into $497,000 or more.
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Time is your greatest ally
Compound growth It is the key to generating life-changing wealth in the stock market. As you build up growth and earn returns on your investments over time, you also begin to earn additional returns on your past earnings, not just the money you originally invested. The longer you let your money grow and compound, the faster your portfolio can grow.
Therefore, you should start investing as soon as possible. The more time you have to let the power of compounding do its work, the less of your own money you will need to invest each month to end up with significant savings.
If you started late or can't afford to invest much right now, don't worry. Every year counts and it is much better to invest even a little now than to postpone starting. You can always increase your contribution rate later, but you won't be able to get this time back.
Choose the right investments
It's equally important to make sure you're investing in the right places, because the stocks or funds you choose will make or break your portfolio. If you invest your money in unstable companies or speculative assets, you could lose more than you gain.
If you are investing in individual stocks, focus on buying quality companies with strong underlying business fundamentals. These fundamentals can include everything from durable competitive advantages to healthy finances and competent leadership teams that can reliably guide companies through good times and bad.
However, individual stocks are not the only way to invest. If you are looking for a simple, hassle-free investment that requires virtually no effort, you can opt for a S&P 500 index fund either ETFs. These funds track the S&P 500 index, so they are invested in 500 of the largest public companies in the United States.
S&P 500 index funds are generally considered among the safest funds you can buy. The index has a long history of recovering from crises and following them with new highs. S&P 500 funds also provide instant diversification to limit the risk that any individual company's prospects can pose to its returns, and the companies within it are giants, making them more likely to see consistent growth over time.
Building a $497,000 portfolio
Regardless of where you choose to invest, timing and consistency are key to a successful investment strategy.
Let's say you're investing in an S&P 500 index fund that, on average, over the long term, delivers a 10% annual rate of return, in line with the historical market average. If you invest $50 per week, this is approximately how much you could accumulate over time:
| Number of years | Total portfolio value |
|---|---|
| twenty | $167,000 |
| 25 | $291,000 |
| 30 | $497,000 |
| 35 | $836,000 |
| 40 | $1,395,000 |
Data source: Author's calculations via Savingscalculator.org.
To reach a total portfolio value of $497,000, you would need to invest consistently for about 30 years. But if you have a few more years to let your money grow, you could earn hundreds of thousands of dollars more, or even break the million-dollar mark.
Please note that these figures are based on the assumption that you are earning average returns in line with historical market performance. If you invest in individual stocks, you could earn well above average returns.
If you earned, say, an average annual return of 12%, your portfolio would be worth about $772,000 after 30 years, if all other factors remained the same. Simply check that you are investing in healthy companies, which will limit your risk while maximizing your long-term profit potential.
It takes time and patience to build a portfolio worth hundreds of thousands of dollars, but it's more achievable than it seems. By choosing the right stocks, investing consistently, and giving your money as much time as possible to grow, you can be on your way to creating life-changing wealth in the stock market.
