Selena Maranjian, The Motley Fool
6 min read
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One of the best ways to amass great wealth is to invest for a very long time.
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Young people are the ones with the most time.
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Get your young loved ones started investing as soon as they're able.
We publish a lot of articles on how you might become a millionaire -- and it's true, you could become a millionaire. But young people can aim much higher than that: They could become multimillionaires, because they have a lot more time in which their money can grow for them.
Here's a look at a handful of investments that have a lot of room to grow over the coming decades. See if you want to recommend any to your kids or grandkids. It's rarely too early to get your kids investing and on the path to smart money management.
First, though, here's a review of how money grows, because it's important to understand what's possible:
|
Growing at 8% for |
$6,000 invested annually |
$12,000 invested annually |
|---|---|---|
|
5 years |
$38,016 |
$76,032 |
|
10 years |
$93,873 |
$187,746 |
|
15 years |
$175,946 |
$351,892 |
|
20 years |
$296,538 |
$593,076 |
|
25 years |
$473,726 |
$947,452 |
|
30 years |
$734,075 |
$1,468,150 |
|
35 years |
$1,116,613 |
$2,233,226 |
|
40 years |
$1,678,686 |
$3,357,372 |
|
50 years |
$3,718,030 |
$7,436,061 |
Calculations by author via moneychimp.com.
See? Multimillionaire status is possible! It does take time, though. If your kid or grandkid is, say, 10, they have 50 years until they turn 60, which is a somewhat early age at which they might retire.
For compounding to do amazing work, you need three things: time, meaningful investments, and a good growth rate. Simply investing in the S&P 500 can be all you need. Over many decades, it has averaged annual returns close to 10%. I've been a little more conservative in the table above because 10% average returns are not guaranteed.
Here, then, are some investments to consider. I'm focusing on exchange-traded funds (ETFs) here, because they're very much stock-like, while also being funds. They trade like stocks, but each of these is invested in an array of companies, offering instant diversification.
A low-fee S&P 500 index fund is hard to beat, and even Warren Buffett has recommended it for most people. It will immediately have you invested in 500 of America's biggest companies -- including all of the "Magnificent Seven" -- which are Apple, Amazon, Google parent Alphabet, Facebook parent Meta Platforms, Microsoft, Nvidia, and Tesla.
