How to Easily Make $1 Million in 20 Years

There’s trying to time the market, and then there’s the easy way of investing if you want to make $1 million in the next two decades.

| More on:
financial freedom sign

Image source: Getty Images

There are few things that are easy when it comes to finances. It can be an incredibly difficult thing to get into, especially when it comes to investing in the stock market. However, so many investors go in wanting to find the next big thing and make millions.

Bad news: that is not a goal.

That being said, there are certainly ways to achieve your goals and perhaps reach the million-dollar mark if it’s what you’ve identified as what you need for retirement, for example. And there are actually easy ways to achieve this, even in a short period of time.

First: Budget!

If you’re going to reach a million dollars in a short period of time, then you need to budget enough money to put aside to achieve this amount. That means cutting back on things you don’t need, so you can put it instead towards your savings and investments.

A good place to start is putting aside between 5% and 10% of each paycheque towards your investments. Then you can drip feed into your investments over a long period of time. This helps even out any drops in the market. Rather than waiting and trying to time the market, missing out on passive income and returns in the meantime, you’ll instead see stable growth in the long run.

Choose the right investments

When it comes to choosing the right investments, definitely speak with your financial advisor. However, I’m going to provide you with a solid example. If you were to invest in anything, I would certainly consider one of the Big Six banks. And a great choice is Toronto-Dominion Bank (TSX:TD).

TD stock is tied as the largest bank in Canada in terms of assets. What’s more, it continues to grow substantially. This is through its United States presence, online growth, wealth and commercial management, and credit card partnerships.

Yet the reason it’s a safe and stable company is the bank, as with other banks, has provisions for loan losses for times like this. During a recession, shares may drop, and so will loans, but it has funds to pay off those loans and start up fresh again.

So, with TD stock trading at 9.69 times earnings and a dividend yield at 4.84%, it’s a great time to consider the bank.

Reaching a million the easy way

The reason this is so easy is once you’ve done the heavy lifting, it just takes reinvesting again and again — both in terms of funds brought in from your budget and reinvesting dividends. We just have to look at the compound annual growth rate (CAGR). For TD stock, the CAGR is 9.56% for its dividend and 6.9% for shares in the last decade.

Starting out with a $50,000 investment, here is how long it would take to reach $1 million by adding $6,500 annually.

YearShares OwnedAnnual Dividend Per ShareAnnual DividendAfter DRIP ValueAnnual ContributionYear End Shares OwnedYear End Stock PriceNew Balance

There you have it. Twenty years from now, you could have over $1 million in your portfolio from investing in TD stock. Now, wasn’t that easy?

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.

Fool contributor Amy Legate-Wolfe has positions in Toronto-Dominion Bank. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Various Canadian dollars in gray pants pocket
Dividend Stocks

Looking for a Reliable Retirement Income? Consider These Dividend-Paying Stocks

Investors looking to establish a reliable retirement income have no shortage of options to choose from. Here's a trio of…

Read more »

edit Person using calculator next to charts and graphs
Dividend Stocks

3 Oversold Dividend Stocks That Could Make You Rich When They Bounce Bank

Don't wait around for these oversold dividend stocks to bounce back, each certainly will, which is why now is the…

Read more »

A small flower grows out of a concrete crack.
Dividend Stocks

Down 8% Last Month, Canadian Tire Stock Is a Deal Heading Into June 2023

May wasn't a good month for the stock, but June has been different from the beginning and may present an…

Read more »

Canadian Dollars
Dividend Stocks

Need Passive Income Right Now? Turn $20,000 Into $152 Every Month

This dividend stock may be down now, but offers substantial passive income through its 9.31% dividend yield as of writing!

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Dividend Stocks

Is Exchange Income Stock a Buy?

Even within an industry, some stocks might be worth considering in certain market conditions, while others may be avoided.

Read more »

Dividend Stocks

2 Top Canadian Value Stocks in June 2023

Canadian Imperial Bank of Commerce (CIBC) stock is a compelling buy in June, and so is this Canadian REIT.

Read more »

Illustration of bull and bear
Dividend Stocks

2 Cyclical Stocks to Buy Before the Next Bull Market

The TSX index has been cyclical in the past 12 months, with neither a bearish nor a bullish trend fully…

Read more »

calculate and analyze stock
Dividend Stocks

Dividend Investors: 4 Canadian Stocks for Many Decades of Payouts

Are you looking for decades of dividends? These four top Canadian income stocks are ideal for steady compounding returns.

Read more »