Everyone who invests their money wants to grow their capital. However, it’s well known that it’s inherently riskier to try and buy high-reward stocks. And even though everyone knows that it’s next to impossible to get rich overnight, there are always investors that try. The best stocks to buy, though, will be high-quality stocks that can grow consistently for years.
It’s crucial to stick to long-term investing. Not only does long-term investing generally lower the risk of your investments, but it also allows you to use the powerful magic of compounding.
And to be honest, it doesn’t always have to be that long before you can reach a $1 million portfolio, especially if you use a Tax-Free Savings Account (TFSA).
By staying disciplined, investing in the best stocks, avoiding losses and using compound interest, you can grow your money rapidly. So here’s how long it will take to reach a $1 million portfolio, depending on how much money you have to start with today.
How long does it take to grow your portfolio to $1 million?
The easiest, fastest, and most efficient way to invest your money is to buy stocks for the long term. You can’t just buy any stocks either. We want to buy the best stocks that will continuously outpace the rest of the economy when it comes to growth. We also want highly resilient stocks so that we can limit our losses.
Warren Buffett has employed a long-term investing strategy and has earned a compound annual growth rate (CAGR) of 20% over 55 years.
Assuming we can earn just half of that 10% CAGR and we can save $500 a month too, or $6,000 a year, it would take just under 30 years if you’re starting with $0 today.
For investors who already have cash or other assets in their portfolio, this head start can help you earn $1 million a lot quicker.
If you have just $25,000 to start with today, it will take just 26 years. And after 30 years, you would have just under $1.5 million, nearly $500,000 more by having just $25,000 more today.
For investors who have $50,000 in your TFSA, it would only take 23.5 years to reach $1 million. After 30 years, though, you would have $1.9 million, almost double what someone with $0 has today. Such is the power of compound interest.
This goes to show that it’s not always about the stocks you buy. The length of time plays a major role. The longer you have to invest and the more you can save, the more your money can compound, even if your stocks don’t perform any better.
Every example grew at the same pace. However, some just had a head start. This is why it’s crucial to start saving and investing as early as possible to maximize your time for compounding.
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A top Canadian stock to buy today
All this time to grow your money will be for naught if you don’t buy the best stocks, however. A top stock to consider today, for example, is InterRent REIT (TSX:IIP.UN), a top residential real estate fund.
InterRent is one of the best ways to gain exposure to the real estate industry, especially for the long term. It’s been one of the top Canadian growth stocks in the past and has plenty of potential to continue that growth in the future.
Over the past decade, investors have earned a total return north of 1,090% or more than a 28% CAGR. That’s how impressive its growth has been.
The fund has not only grown its portfolio, but has also invested its assets to increase the value of the units. This not only grows unitholder value, but also grows the fund’s cash flow. And clearly, with a more than 1,000% gain over the last decade, InterRent is one of the best at what it does.
It’s recovered rapidly as of late but is still slightly cheaper than it was before the pandemic, offering a discount for investors to buy today. I’d buy the stock soon, though. It’s recovering fast.
The key to successful investing and growing your money as fast as possible is giving yourself the most time in the market while staying disciplined and patient. Then, as long as you’re buying the highest-quality stocks, you’ll put yourself in a prime position to grow your money rapidly.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Daniel Da Costa has no position in any stocks mentioned.