How $100 a Month Could Grow Into a 6-Figure Portfolio, According to History

Investing $100 per month doesn’t seem like enough to build real wealth. Even after 30 years, the $36,000 total you’d have invested by that point probably wouldn’t even last 12 months.

But that leaves out the most important part of the long-term investing equation: compounding growth.

Historically, the S&P 500 (^GSPC -0.25%) has generated an average annual return of around 10%. There’s no guarantee that investors will get that same return going forward, but it does demonstrate how a portfolio can really grow when even modest monthly investments are consistently made over time.

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$100 per month could become more than $225,000

Let’s imagine that you invest that same $100 per month and capture the S&P 500’s long-term average annual return of 10%. After 30 years, you’d have invested $36,000, but the overall value of your portfolio would grow to approximately $226,000.

That’s around $190,000 you would have earned just from the long-term power of compounding. Money you essentially earned by doing nothing but letting it sit and grow over time.

And that compounding can grow even more powerful. If you increase your monthly investment from $100 to $200 or your time horizon from 30 years to 40 years, you could easily double or triple your portfolio depending on your rate of return.

Time and discipline are the most important ingredients

I’ve said many times that investing is one of the few things where you usually get rewarded more for doing less. If you’re able to ride out short-term volatility and avoid the temptation to time the market and sell when things look bad, your long-term results are very likely to be better.

Investors should expect bear markets, recessions, and corrections along the way. That’s normal.

But if you keep investing that same $100 per month, you’ll end up buying more shares when prices are lower. More importantly, it eliminates the need to try to predict what the market’s going to do next.

The longer your holding period, the more important compounding becomes to your total investment value.

Even small investments can lead to big results

The easiest way to start is by using a low-cost S&P 500 exchange-traded fund (ETF) like the Vanguard S&P 500 ETF (VOO -0.21%). It owns every company in the index and charges just 0.03% in fees annually. Instead of trying to pick winners, you can just own the entire basket.

There’s no guarantee that the future will look like the past, but history provides a pretty good roadmap as to what investors can reasonably expect. Even $100 a month can make it happen.