Here’s how far $100 a month investing in the stock market can really go

Investing in the stock market is one of the most affordable ways to save over time, and even small monthly contributions can help you build life-changing wealth.

How much you could earn by investing will depend on where you buy and how much you can afford to invest. Building a robust portfolio of individual stocks can help you beat the market and achieve higher than average returns, but this approach can be expensive and requires intensive research.

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If you are a beginner, it may be wise to start with an investment such as an index fund or an exchange-traded fund (ETF). These investments are bundles of shares grouped into a single fund. In other words, buying a single fund will give you a stake in hundreds or even thousands of shares at once.

Again, your returns will vary significantly depending on where you invest. But if you only have $100 a month to invest in the stock market, here’s roughly how far it could go in a few different scenarios.

Choosing the right investments

Historically, the stock market as a whole has earned an average rate of return of about 10% per year. This means that while you most likely won’t earn 10% returns every year, the annual ups and downs should average around 10% per year over the decades.

Some stocks and funds will earn higher returns than this, especially if you hand-select stocks that are poised for significant growth. Some ETFs can also beat the market, such as funds that contain only growth stocks or stocks in a specific industry.

^ SPX data by YCharts

Where exactly you choose to invest will depend on your goals, risk tolerance, and how much time and effort you’re willing to put into your investment strategy.

Buying individual stocks can be the most profitable approach. However, it requires significant research, as you will need to research each company you are interested in owning to ensure it is a sound long-term investment. Then you’ll need to do this a few dozen more times because you’ll need at least 25 to 30 stocks for a well-diversified portfolio.

Index funds and ETFs are less customizable and many may not be able to beat the market. However, they provide instant diversification and can be a much simpler and simpler way to get started in the stock market.

The Path to Lifetime Wealth

For simplicity’s sake, let’s say you’re investing in a broad market ETF such as a S&P 500 ETF or total stock market ETF.

If you were to invest $100 per month, here’s roughly how much you could earn over time, depending on whether you earn an average annual return of 10% (in line with the historical market average), an average annual return of 9 % or an average annual return of 11%:

Data source: author’s calculations via investor.gov.

Time is an incredibly powerful tool when investing, and even if your investment earns below-average returns, you can rack up hundreds of thousands of dollars in total savings if you give your money decades to grow.

No matter where you choose to invest or how much you can afford to contribute each month, it’s essential to start as early in life as possible. Even small amounts can go a long way and the earlier you start, the more you can earn.