Here’s How Saving $10 a Day for 30 Years Can Create a $1 Million Portfolio

You may think that trying to grow your portfolio to $1 million or more is unattainable and that it is too difficult to do. But if you’re looking for small wins and savings, this scenario becomes much more plausible. Eating out less, changing your utility or cell phone provider, or buying private label products rather than big brands are some ways you can regularly achieve additional savings.

Simply saving and investing $10 a day can be enough to eventually grow your portfolio to at least $1 million. Here’s how it might work.

Saving $10 a day is the same as saving $3,650 a year.

If you were to think about saving and investing $3,650 a year, that amount might seem difficult, especially with inflation. But if you break it down into smaller chunks and set a goal of saving $300 a month or $10 a day, it may be much more achievable. And it also gives an idea of ​​how costly these seemingly innocent and modest daily expenses can be. Depending on how much you spend on coffee or eating out every day, avoiding some of these expenses or switching to cheaper options may be enough to help you achieve those savings.

And if you can save $3,650 a year and do it for the long term, then you could be on your way to building a strong retirement fund. Over 20 years of saving this amount, you will save $73,000. And after 30 years, the total amount will be almost $110,000. That’s nowhere near $1 million, but this is where investing those savings can make a huge difference.

The best Vanguard fund can help you achieve market-beating returns.

If you can save $10 a day, or roughly $300 a month, you better put that money to work right away. This means placing it in an exchange-traded fund (ETF), which can help grow your savings without putting them at great risk. ETFs offer good diversification and can allow you to achieve greater long-term returns.

One ETF that is popular among growth investors is Vanguard Growth Index Fund ETF (NYSEMKT: VUG). As the name suggests, it focuses on growth stocks. The fund has 183 stocks, with the majority of its holdings in technology stocks, making up nearly 58% of the fund’s portfolio. Consumer discretionary stocks make up the next largest sector, accounting for more than 18% of Vanguard’s fund assets. Bringing you a diverse selection of the world’s fastest-growing stocks, including Nvidia And Amazonthe fund can be a great place to invest your money each month, especially given its minimal expense ratio of just 0.04%.

Over the past 20 years, the fund’s total return (including dividend payments) has been over 900%, and it has significantly outperformed S&P 500 Index.

VUG Total Return Level Data from YCharts

An investment in a Vanguard 30-year fund could result in a portfolio worth more than $1 million.

The Vanguard ETF’s return of approximately 920% over the past two decades averages a compound annual growth rate (CAGR) of approximately 12.3%. By comparison, the S&P 500 averaged an annual growth rate of about 10.7%.

Assuming these rates continue over the long term, here’s how an investment in a Vanguard fund of $10 a day or $300 a month would grow over the years and how it would compare to simply mirroring the S&P 500 Index.

Author’s calculations.

While the difference in growth rates may seem small, the difference in balance sheets can be significant over a very long period. That’s why investing in Vanguard’s growth-oriented fund can be especially effective. The potential for it to continue to outperform the S&P 500 could make it an ideal place to regularly park your savings.

However, it is important to remember that future earnings never a guarantee and that they are likely to differ from the estimates above. But by investing in growth stocks, you can have a greater chance of success and outperform the market over the long term.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Nvidia and the Vanguard Index Funds-Vanguard Growth ETF. The Motley Fool has a disclosure policy.