How to Grow Your Portfolio to $1 Million

There was an article over at the Motley Fool that talked about how to achieve a portfolio of $1 million. It was basically a sell job for one of their newsletters, Hidden Gems. They presented 4 different scenarios where an investor could ultimately amass a portfolio of $1 million depending on when they start. Keep in mind that their assumption is a return of 15% – a high rate of return that may be difficult for many (most) people to achieve. Here is what they presented:

Scenario 1: Start with $350 and add $350 in new savings each month. Do so for 25 years. You will end up with $1 million.
So you’re fresh out of college and just starting your first job as a cubicle vassal in the big city. Dreams of millionairedom seem as “pipe” to you as the canned air you breathe Monday through Friday. But never fear, young capitalist. Take your present savings, what’s left from Grandma’s graduation gift, and every month put away just 17.5% of your monthly $2,000 paycheck. In 25 years — and my, how they’ll fly — you’ll be able to afford that house on the hill.

Hint: If you’re unable to find an online broker that will let you open an account with your initial stake, Sharebuilder.com offers low trading fees and no account minimums. With a stake greater than $5,000, additional brokers offer very low trading fees (TD Ameritrade’s IZone, for instance). The good news is that trading costs seem to come down every day.

Scenario 2: Start with $30,000. Add $350 per month for 20 years.
Thirty thousand dollars is a great place to start. You can slash five years off your timeline while investing no more every month than our recent college graduate. Just think: You put $350 a month into your retirement fund, and you’ll likely be a millionaire long before you’ve even paid off that mortgage.

Scenario 3: Start with $100,000. Add $225 per month for 15 years.
Now we’re talking. You’re already 10% of the way to millionairehood, my friend. Just 90% to go and you’re set. How to do it? If you’ve managed to save up $100,000 already, putting away an extra $225 a month for the next 15 years should be a piece of cake. No pain, all gain. Shave five years off the 20-year plan because of your present circumstance. You’re there in 15 years.

Scenario 4: Start with $150,000. Add $500 per month for 12 years.
What?! You’ve already got $150,000 stashed in the bank, but it’s only earning 0.9% in a money market fund? Well, there’s no need to be embarrassed. Wealth preservation has been the primary aim of history’s greatest investors. But with retirement looming, you should earn at least a market rate of return. If you can stand the volatility of small caps and can add $500 in new savings per month, we think you can get there in 12 years.

Again, they focus on that 15% return through aggressive small-cap investing which may not be for everyone, but it is interesting nonetheless to see how it can be achieved no matter what stage in life you are at. It just takes some commitment and dedication.