Gen Z Investors: How to Make $2.8 Million Before Retirement

If you’re new to investing, then right now may seem like a terrible time to get into it. Every headline out there is screaming at you that investing right now is the worst. The markets are down and could only drop lower.

Though Gen Z investors have something that many other investors don’t: time. If you get in now and hold stocks for decades, you could be a multi-millionaire by retirement.

Today, I’m going to show you how to achieve just that.

Set your sites low

Seriously. When it comes to investing, don’t think you’re going to be a millionaire over night. This is playing the long game, which in any scenario usually proves the most fruitful. Especially when it comes to investing.

For Gen Z investors, this is definitely the case. Let’s say you’re 20 years old and just opened your first Tax-Free Savings Account (TFSA). You don’t have very much to put into it, but can probably afford $3,000 each year from now on, with some additions here and there.

For this example, we’re going to assume you only have $3,000. For the rest of your life. That’s achievable, isn’t it?

Choose wisely

Then, of course, comes the investment options. I would definitely meet with a financial advisor when discussing your goals and deciding what you want long term. However, for the purposes of this example, I’m going to focus on investing that $3,000 into a Big Six Bank. And honestly, you’re likely going to be investing elsewhere as time moves on. So $3,000 towards one stock isn’t too risky as long as you’re diversified elsewhere.

If you want stability, I would then go with the largest of the Big Six and choose Royal Bank of Canada (TSX:RY). It’s the largest by market cap, and remains pretty stable even in this downturn. That’s significant as it means if you enter retirement during a downturn, you’re not likely to see your returns fall as dramatically as other banks.

Royal Bank offers a dividend yield at 4.02% as of writing. You would then use that to reinvest in your stock as well. Royal Bank stock has grown at a compound annual growth rate (CAGR) of about 8% in the last decade. Its dividend has grown at a CAGR of 8.2% in that time. So we’ll take this into consideration as well.

Retiring at 60

Now let’s say you want to retire at 60. That means you have 40 years to become a multi-millionaire. Below, based on the information above, you’ll see what reinvesting and adding $3,000 each year will achieve.

And there you have it. Gen Z investors end up with $2.8 million in 40 years!