You may be surprised to know that according to a report by Wealth Management USA, about 18% of Americans are millionaires, translating to about 25 million people. And while there are many ways to accumulate a seven-figure net worth, some opportunities are more common than others.
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Many millionaires start their own businesses or invest in real estate to earn their wealth, while others inherit money. But the number one way Americans become millionaires is actually within the reach of average workers, if they start early and stick to their plan.
Here’s a “boring” path to wealth that doesn’t involve starting a business, investing in real estate, or getting paid.
Want the “easy” way to a million dollars? Constant investing is the best way to build wealth.
According to a report from Morningstar, investors with $1 million or more in their Fidelity 401(k) accounts invest regularly, usually every two weeks or every month. They don’t trade in and out of aggressive investments like leveraged ETFs, but instead pool their money regularly into their “boring” investments.
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There are many reasons why consistent investing is the “easy” path to $1 million. First, adding money to your investments regularly regardless of the market environment ensures that you will achieve average value. You buy more stock when prices are low and less when prices are high. You won’t put all your money into either the absolute bottom or peak, but since the market’s long-term trend is up, achieving that “average” price provides significant returns.
Second, by consistently investing in “boring” options like mutual funds, 401(k) funds or high-quality stocks, you won’t be taking on extra risk. With automatic contributions coming from your paycheck or bank account, you won’t be tempted to follow the latest investment fad, a mistake that costs many novice investors their entire bankroll. Preservation of capital is half the battle when it comes to building wealth, automatically contributing to relatively “boring” investments will help protect your bankroll in the long run.
The third reason why consistent investing works is simple. If you add money to your account consistently, you will have more money in it. If you invest just $30,000 and watch it grow, you could end up with $60,000, $120,000 or $240,000 in your account, depending on how long you keep this investment. But if you regularly add $1,000 a month to your account for 40 years, you’ll contribute $480,000. A simple doubling of your money over time will be almost enough to reach that $1 million level.
