How your money can grow like gangbusters if you stick to the plan

I want to blow your mind with this article. But if I can just inspire you to commit to building a fat nest egg for retirement — while believing you can actually do it — that will be just fine, too.

I've been investing in stocks for almost 30 years now, and I've made plenty of mistakes. Costly ones. But despite that, I'm not super worried about retirement, because I've amassed a considerable sum. Yes, I needed to invest new sums regularly, and yes, I needed to invest effectively (i.e., in stocks, not savings bonds or savings accounts), but another critical thing I needed was to simply stay the course.

How money grows: the early years

When you decide to invest in stocks for the long term, the early years are not very exciting. That's a problem, because it's easy to lose interest — especially if you start just before the market takes a breather or, worse, pulls back. (Stock market corrections happen all the time — every year or three, on average. Despite occasional pullbacks, the market has always recovered and gone on to new highs.)

Let's start crunching some numbers to see how your money might grow. We'll assume that you're going to start with $0, invest $12,000 per year, and that your money will grow, on average, by 8% annually. Off we go!

Data source: calculations by author.

See? It's nice, but it's not exciting. But it's starting to get interesting. See — by year five, you've invested $60,000 and you've earned $16,000, for a total near $76,000. Not bad.

By the way — your money will definitely not grow exactly like in the table above, because you won't earn an average return evenly every year. There will be up and down years, sometimes in the single digits, sometimes double. The stock market is simply volatile. On average, over many decades, the stock market has averaged annual gains of close to 10% — so I'm using 8% to be a bit conservative. (These returns ignore inflation, though, which does shrink your purchasing power over time.)

The table below shows how the S&P 500 index of 500 of America's biggest and best companies has grown, year, by year, over many years. This is more like how your own portfolio might grow.

Data source: Slickcharts.com. Returns reflect reinvested dividends.*Year to date as of mid-April, 2024.

How money grows: the middle years

Let's return to our unfolding example of how money grows. You're still investing $12,000 annually, and time has gone by. Eventually, you'll get to the middle years of your investing marathon. Your results might look something like this:

Data source: Calculations by author.

Now it's much more interesting, right? By the 20-year mark, you've plowed nearly a quarter of a million dollars into your account, and you have much more than half a million dollars in it. Your investments have earned a hefty $353,000 for you!

If you started around age 30, you'll be around 50 now, with a very solid nest egg growing.

Think back to your early years for a moment. When your portfolio was only worth, say, $50,000, a 1% increase in it would bump it up by... $500. Eh.

Now, though, if your portfolio is worth $593,000, a 1% bump means an increase of $5,930 — much better. Between year 20 and year 21, your portfolio will grow from $593,076 to $653,481 — an increase of $60,405 for that one year, even though you only added your usual $12,000. Divide that by 365, and your portfolio grew by an average of $165.50 per day!

How money grows: the crazy years

Now we're starting to get to the crazy years. Check out the rest of the table, below:

There's a good chance you weren't lucky or savvy enough to start investing in your 20s, so you may not be able to save and invest for 50 years. (Your kids may be able to, though — so try to spark their interest in stocks!)

Even if you only have 30 or 40 years in which to grow your money, you can still work wonders. Check out year 30 above: You would have invested $360,000 by that time, and your portfolio would be worth $1.1 million more than that! Between year 30 and year 31, your portfolio would grow from $1,468,150 to $1,598,562 — increasing by $130,412. (That may well exceed your salary at that point!) Divide it by 365, and you'd be making, on average, $357 per day.

Your portfolio will grow by $281,550 to 3,638,922 from year 40 to year 41. That's very likely going to exceed your salary, and it will be an average increase of $771 per day!

These are some crazy numbers, and they're all coming from some fairly conservative estimates. You may well average more than 8% annual growth, for example, and you may well be able to sock away more than $12,000 annually. Yes, that's an aggressive sum for a young person, but as you age and, ideally, earn more, you can probably sock away more and more over time.

Between year 49 and year 50, your money will grow by $562,819 — an incredible $1,542 per day, on average.

How to start building your massive portfolio

These numbers get really wild after many years, and you might just tune them out as being unrealistic or too far away. Yes, they take a long time to achieve, but they are realistic. For best results in your life, believe the math and commit to amassing as much as you'll need for retirement. It can be hard to think about retirement when you're young, but most of us will retire in the future, and we'll need significant retirement income — much more than Social Security will provide.

So consider saving aggressively and investing effectively — perhaps simply in a low-fee index fund such as the Vanguard S&P 500 ETF (VOO).

Selena Maranjian has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.

The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.

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