There is no guarantee as to the annual performance you will get in the medium to long term, but by targeting growth stocks, you can increase the chances that you will get significant gains in the future.
Growing your portfolio to $1 million or more by retirement can be an excellent goal to aim for. While there’s no magic number that guarantees you’ll have enough money to support the kind of lifestyle you want to enjoy in your retirement years, the key is to focus on growing your portfolio in a way that doesn’t don’t put your hard earned savings. at risk. You may fall short of $1 million, but you may still end up with a lot more.
Below, I will show you how it can be possible to reach $1 million in different age groups. While you may not need that much money if you have many years of investing, you still may not need to have six-figure savings unless you’re approaching 50.
As long as you plan to invest for more than 10 years, growth stocks are the way to go
Growth stocks can make the best investments to hold for the long haul. While dividend stocks and value stocks may make for less risky options, the big gains that grow your portfolio to significant levels will likely come from investing in high-potential growth companies.
They are not ideal, however, for investors who may need to withdraw money in the short term, since it can sometimes fluctuate significantly. Investors only need to look at 2022 as an example of that when technology stocks and growth as a whole struggled due to the increase in interest rates. U Invesco QQQ Trust (QQQ 0.61%) it decreased by 33% that year. However, over the past five years, the growth-focused exchange-traded fund (ETF) has also achieved gains of 156%.
QQQ data from YCharts
This is why the key for most long-term investors should always be on growth stocks. They can provide the best returns, even if there is a year off the road. As long as you are not in a hurry to sell your stocks, they can make the most optimal investments.
The Invesco QQQ Trust can be an ideal ETF to hold, as its portfolio includes the top 100 non-financial stocks on the market. Nasdaqgiving exposure to the best growth stocks available on the markets. It also comes with a reasonably low expense ratio of 0.20%. Historically, over the past 20 years, when including dividends, the fund has generated an average annual return of 13.9%.
How much do you need to invest to reach $1 million?
Let’s assume that if you invest in the Invesco fund, you will average an annual return of 13%, which is slightly lower than its 20-year average. Based on that estimate, here’s how much you need to invest today, based on your age and expected retirement at age 65, for your portfolio to reach $1 million.
| Years old | Years to retirement |
Investment today |
|---|---|---|
| 30 | 35 | $13,876 |
| 35 | 30 | $25,565 |
| 40 | 25 | $47,102 |
| 45 | 20 | $86,782 |
| 50 | 15 | $159,891 |
| 55 | 10 | $294,588 |
Calculations for the author.
The actual returns you’ll get will likely vary, but by investing the above amounts based on your age, you can put yourself in a good position to hit the $1 million mark in your portfolio by the time you retire. However, it would be ideal to invest even more if able, as it can help accelerate the growth of your portfolio while also offering you a buffer in case current annual returns fall short of 13%.
The Invesco fund is a great option for all growth investors
Regardless of whether you’re saving for the long term or not, putting money into an ETF like the Invesco QQQ fund can be a great way to diversify your holdings and keep you invested in the market while keeping your overall risk down. Even if you don’t know which stocks to invest in, the fund’s broad portfolio will give you exposure to many excellent growth stocks and increase the chances that you will achieve strong gains in the future.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.