How to Invest $100,000 to Make $1 Million

By Jeff White | AUG 30, 2023

Turning $100,000 into $1 million might seem like a lofty goal, but it’s more than possible if you make the right decisions and plan out your investments. Having $1 million can be a huge boost to your retirement prospects and can help you afford the lifestyle you want down the line. While it’s not likely that you’ll be able to turn that $100,000 into $1 million over a short period of time, there are plenty of ways to get there sooner than you might expect. A financial advisor can help you put together an investment plan for the future.

Determine Your Starting Point and Risk Tolerance

Before you start investing towards $1 million, it’s important to gauge your entire financial situation. If you’re a strong saver who amassed $100,000 by contributing mostly on your own, it may be easier for you to reach $1 million given that you’re likely to keep contributing as you work towards your goal. On the other hand, if you have debt and other fixed expenses, it’s important to factor those in. Otherwise, they could derail your ideal investment timeline.

It’s also incredibly important to determine your time horizon, which is the amount of time you’re trying to reach your goal of $1 million within. For example, if your time horizon is your retirement age and you’re in your 20s, you naturally have more time to reach your goal than someone in their 50s or 60s who’s not far from retiring.

Insights like these will help to inform your risk tolerance. In other words, someone with more time before retirement can afford to be riskier with their assets in the interest of higher gains. However, if you’re nearing when you’d like to be retired by, you’ll have much less time to make your $100,000 reach $1 million. However, you’ll probably want to avoid overly risky investments being that losing your money would be quite detrimental.

Understand the Math Needed to Get There

Investing is a numbers game, and it’s important to know the ins and outs of how to achieve your goals. Once you know your time horizon, how much you’ll continue to save and what your expenses are, you’ll need to crunch the numbers and come up with some projections. This will help you create the growth goals that you need to hit in order to reach the million-dollar landmark.

For example, imagine you’re starting with $100,000 at age 30. You know you’ll be saving $20,000 per year and investing in ETFs with an average return of 5% annually. According to SmartAsset’s investment calculator, you’ll hit $1 million in about 22 years.

Comparably, if you only have the ability to add $1,000 per year, you’ll need to achieve a rate of return of about 11% annually to hit $1 million in the same time frame. If you only have 10 years to grow your money before retirement, the calculation will change even more harshly. In other words, these numbers will dictate the growth you’ll have to hit each year.

Taking Advantage of Compound Interest

When it comes to building your pool of wealth, compound interest is the ultimate key. This incredibly important financial tool can make your money grow at exponential rates, especially as your rate of return or asset pool increases. Over time, compound interest can have a giant effect on your money.

For instance, let’s say your initial investment is $100,000 and you invest it all in S&P 500 ETFs, which historically have averaged about a 10% return annually. Then let’s say you continuously contribute another $100 every month for 30 years. With all of these factors at play, your initial $100,000 investment could turn into $1,942,333.05, according to the SEC’s compound interest calculator. Taking advantage of compound interest can help you reach your goal faster than expected.

Focus on Long-Term Investments

While your specific investments will vary depending on your time horizon, tolerance for risk and other personal factors, it’s important to remember that not all investments are created equal. ETFs and bonds can yield more modest returns, while being more stable and less risky. Individual stocks, on the other hand, can come with more risk, but may also produce more significant value. The best way to prepare for volatility is to allocate your money across a wide array of asset classes.

You may want to take riskier approaches and invest in volatile, high-potential stocks or even options. This can be a great way to diversify your portfolio, as long as you’re comfortable with the hefty risks you're taking on.

Additionally, be on the lookout for things that can drain your investment portfolio. Financial advisors and wealth managers charge fees, and often those fees grow as your money does. Certain investment funds charge fees as well, and while most brokerages have eliminated many trading fees, things like option writing can be a damper on your path from $100,000 to $1 million.

Bottom Line

There’s no doubt about it: $100,000 is a lot of money. Turning it into $1 million may seem difficult for those that haven’t done it before. However, it’s more doable than you realize if you can cover all your bases. While the specifics of your investment journey will depend on your risk tolerance and time horizon, don’t be deterred by the seemingly large goal of $1 million. With the right planning, you could get there.

Tips for Investing

• Growing your money isn’t always the easiest task. With so many investment options at your fingertips, it can be difficult to cut through the noise and decide which money management style is best. A financial advisor may be able to help. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now. 
• Investing on your own can be difficult, but it’s not impossible with the right tools. SmartAsset’s asset allocation calculator can help you determine a portfolio configuration that fits your situation.

Photo credit: iStock.com/ArtistGNDphotography, iStock.com/Delmaine-Donson