Investing Investing Basics

9 Ways to Grow $5,000 Into a $1 Million Nest Egg

Invest smarter, not harder, and see your $5,000 snowball into a $1 million nest egg.

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Updated June 6, 2024
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Besides lucky lottery winners and clever stock strategists, becoming a millionaire overnight is nearly impossible. But reaching millionaire status over decades and retiring with a tidy nest egg?

Thanks to compounding interest, it’s not an idle fantasy. The earlier you start investing, the easier it is to turn your upfront investment into $1 million. 

Keep reading to see how much you should invest (and for how long) planning for retirement.

Steal this billionaire wealth-building technique

The ultra-rich have also been investing in art from big names like Picasso and Bansky for centuries. And it's for a good reason: Contemporary art prices have outpaced the S&P 500 by 136% over the last 27 years.

A new company called Masterworks is now allowing everyday investors to get in on this type of previously-exclusive investment. You can buy a small slice of $1-$30 million paintings from iconic artists, all without needing any art expertise.

If you have at least $10k to invest and are ready to explore diversifying beyond stocks and bonds,see what Masterworks has on offer. (Hurry, they often sell out!)

Investing $5,000 but nothing else at 10% for 25 years

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To understand how much work it takes to turn $5,000 into $1 million, we’ll start by looking at how much an initial investment at the average rate of return can net you.

Let’s say you make an upfront investment of $5,000 with no additional monthly contributions. There’s no way to know exactly how much you’ll earn on an investment, but the S&P; 500 has an average annual return of 10%, so let’s assume that’s what you’ll make.

If your interest compounds annually, you’ll end up with around $54,173.53 after 25 years. That’s far, far lower than your $1 million goal, and it doesn’t account for how 25 years of inflation will drastically lower your buying power.

In other words, you’ll need to do more than make a one-time $5,000 investment to boost your bank account to $1 million.

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Investing $5,000 but nothing else at 20% for 25 years

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What if you invest the same amount of money for the same amount of time but at double the average rate of return? 

You’ll end up with $476,981.08, which puts you much closer to millionaire status than investing $5,000 at 10%, but it still leaves you at just 50% of your goal.

Plus, stocks with an annual return of 20% are few and far between. You might be lucky enough to invest in a high-performing company that maintains a rate of return double the average over 25 years, but you shouldn’t count on it.

Besides, even a high-yield investment leaves you with earnings below $500,000 once your investment term is up. Without additional monthly investments, your chances of earning $1 million on your initial $5,000 are slim to none.

Investing $5,000 plus $800 monthly at 10% for 25 years

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Everything changes once you start making additional monthly deposits on top of your principal investment of $5,000. 

If we add $800 a month to your upfront investment, assume an average return of 10% a year, and compound the interest annually, you’ll end up with $998,305.30.

That’s still a couple thousand away from an even $1 million, but close enough to still call yourself a millionaire, and substantially better than what you’d earn without those additional monthly deposits.

Get a free stock valued between $5 to $200

Secret: You don't need thousands of dollars to buy thousand-dollar stocks or create a diverse portfolio.

Robinhood offers a method of investing called “fractional shares.” On its own, one share of a single stock could cost a lot of money, making it difficult to diversify. Robinhood allows you to buy pieces of stock instead, so you have the option to build a diverse portfolio quickly.

Let’s say you want to invest $250, as an example.

With that amount, you could build a relatively diverse portfolio with an investment of $50 in a big tech stock, $50 in a retail stock, $50 in an energy stock, $50 in a manufacturing stock, and $50 in a bank.1

Even better news? Add a Robinhood Gold membership, and you’ll get access to 5.00% APY2on your uninvested cash3and the ability to buy and sell stocks 24 hours a day, 5 days a week.

Open and fund a Robinhood account and earn up to $200 in stock

Investing $5,000 plus $1,500 monthly at 10% for 20 years

Andrey Popov/Adobe Woman using an internet-based banking service.

The more money you can invest every month, the higher your overall return will be — and the less time it will take you to pass the $1 million mark. 

For instance, if you nearly double your monthly contribution from $800 to $1,500 and lower your investment time from 25 to 20 years, you’ll have $1,064,587.49 at the end of your two decades.

Investing $5,000 plus $2,600 monthly at 10% for 15 years

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Is two decades too long to wait for $1 million? Up your additional monthly contribution to $2,600. With the same average return, you’ll end up with $1,012,187.67 after just 15 years.

Investing $5,000 plus $1,100 monthly at 8% for 25 years

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10% is the average annual return for the S&P; 500 over the long run, but if the last few years have shown us anything, the economy is notoriously hard to predict or control. 

To err on the side of safety, let’s see what happens when we lower your estimated interest rate to 8%.

Investing $5,000 upfront and another $1,100 once a month, every month for the next 25 years at 8%, you’ll end up with $999,240.78, just close enough to call yourself a millionaire.

Investing $5,000 plus $1,800 monthly at 8% for 20 years

Jirapong/Adobe Female is sketching out graphs on a sheet.

Upping your monthly investments from $1,100 to $1,800 gets you closer to $1 million in five fewer years. Even at the below-average rate of 8%, you’ll end up with $1,011,763.21 after 20 years.

Investing $5,000 plus $3,025 monthly at 8% for 15 years

makibestphoto/Adobe A lady is taking care of budget-related tasks.

By this point, you know the best way to retire with $1 million is to make ongoing monthly investments — the higher, the better. 

If you can put away just over $3,000 a month on top of your $5,000 lump sum investment, you’ll have $1,001,482.58 in just 15 years.

Investing $5,000 plus $5,175 monthly at 10% for 10 years

Alex from the Rock/Adobe stock market investments

Want to make yourself into a millionaire as rapidly as possible? A decade isn’t exactly overnight, but investing more than your principal each month at an average annual return of 10% will get you to $1,002,682.78 in just 10 years.

Of course, few Americans have an extra $5,000 a month just waiting for an investment opportunity to show up. 

But if you’re serious about earning your first $1 million, investing income from a second job or side gig plus the money you save through a strict budgeting regimen is the best way to get there.

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SoFi has no account or overdraft fees5 and additional FDIC insurance up to $2 million on deposits is available through a seamless network of participating banks.67 Plus, you can receive your paycheck up to 2 days early.8

How to earn up to $300: Sign up and make a direct deposit within the first 25 calendar days of the promotional period, then collect a $300 cash bonus with a direct deposit of $5,000 or more.

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Bottom line

VERTEX SPACE/Adobe A team of architects is designing for an upcoming project.

Turning $5,000 into $1 million takes time, discipline, and additional funding. Depending on your average rate of return and how many years you can afford to wait, earning $1 million through investing is far from a one-and-done job.

However, with solid financial planning, budgeting, and plenty of guidance from a trusted financial planner or retirement advisor, you can build wealth while you sleep to $1 million or more.

Masterworks Benefits

  • Invest in art like a millionaire for a relatively low cost
  • Art investments have outperformed the S&P 500 by over 131% for 26 years
  • Purchase shares of artwork by top artists
  • Hedge against inflation and diversify your portfolio