Here’s how to invest $300 a month into solid ETFs and generate $1 million by the time you retire

There are many ways to try to cut costs and save money. From canceling unused subscriptions to consolidating debt to cutting back on spending on eating out, cost-cutting efforts can free up money and give you more room to invest. And there’s a huge incentive to do so. It can help you become a millionaire.

If you can save $10 per day, or $300 per month, and invest it regularly in a growth-oriented exchange-traded fund (ETF), you could end up with a portfolio worth more than $1 million. You can get it. Here’s how:

Growth-focused funds allow you to generate the best returns over the long term

You can invest in S&P500 Gain broad and diversified exposure to the stock market. Over time, returns increase at the index’s long-term average rate of approximately 10%. But if you’re an investor and can stay invested for decades, it can be advantageous to focus more on growth stocks. By doing so, you take on some risk, but ultimately achieve greater returns. Growth stocks are more volatile and may have a bad year (like 2022), but over the long term they can increase in value and outperform broader, more diversified funds.

One particularly attractive fund is Vanguard Growth Index Fund (VUG -2.25%). As the name suggests, this is a growth-focused fund that targets some of the world’s best stocks. The expense ratio is extremely low at just 0.04%, meaning fees won’t eat up much of your profits. Also, with nearly 200 stocks, it offers great diversification.Top stocks such as microsoft, appleand Nvidia It ranks among the top three holdings and accounts for nearly a third of the fund.

Over the past 10 years, the Vanguard Growth Index has generated a 270% return, outperforming the S&P 500, which has risen 177% over the same period. The 270% fund has an average compound annual growth rate of 14%.

How $300 per month turns into $1 million

If you invest $300 every month, you’ll have $3,600 in one year. If you invest for 30 years, your total will be $108,000. But with the power of compound interest, your portfolio’s value can be much greater.

Assuming you invest $300 per month in the Vanguard Growth Index Fund and achieve an average annual return of 14%, this is how your portfolio’s value can grow over many years.

Calculations by the author.

It takes 26 to 27 years for a portfolio to reach the $1 million level. So even if he starts investing $300 a month at age 39, assuming he starts investing at age 65, that could still be enough time for him to hit $1 million by the time he retires. Of course, in the future you can also compensate for this by investing more funds. Either way, this is a very simple strategy that any investor can deploy. Set aside money each month and invest it in a diversified growth fund like the Vanguard Growth Index Fund.

Sure, the average annual return of 14% is high, but the actual return and growth rate will definitely be different. However, investing in this ETF gives you a great opportunity to profit from growth stocks over the long term.

There’s never a bad time to invest

Even if the current economic climate makes it difficult to save money, adding any amount to an ETF can be a great move for investors. Developing the habit of saving and investing every month is a great habit to start. Many brokerages now offer no commissions or low commissions, making it worthwhile to invest in ETFs even with small amounts of money. And ultimately, by the time you retire, you’ll be in a stronger financial position, which will be better for you.