Make Money

How to Make $1 Million: A Look at Investing Over the Last 10 Years

You could make $1 million by investing! Here’s the proof with two ways you could have made a million dollars the last ten years in the stock market.

How would you like to make $1 million by investing? Let’s take a look at two ways you could have made a million dollars this past decade by investing in the stock market. We will look at which various investment rates would have netted a million dollars. I’ll use one of the four main S&P 500 index funds as my benchmark. That index fund will be the basis for all of my calculations.

There are four funds that I have to choose from; Vanguard, T. Rowe Price, Charles Schwab, and Fidelity. I’ve decided to use Vanguard 500 Index Investor (VFINX) as my benchmark. Fidelity’s fund has only been around since 2011, so that one is out of the race. The other funds have been around much, much longer. The three funds that have been around for the past decade have annually averaged from 13.2% (Schwab) to 13.40% (T. Rowe Price). The Vanguard fund’s average sits right in the middle at 13.33%.

The numbers I use come from Morning Star. The only number I need to use is what they call, “Total Return”. Total return is a percentage and is for a given period. If you are wondering how they calculate total return, here is a blurb from their site:

Total return includes both income (in the form of dividends or interest payments) and capital gains or losses (the increase or decrease in the value of a security). Morningstar calculates total return by taking the change in a fund’s NAV, assuming the reinvestment of all income and capital gains distributions (on the actual reinvestment date used by the fund) during the period, and then dividing by the initial NAV.


The two ways I’m going to walk through are:
1) If you invested in a lump sum
2) If you invested annually

1st Method: Lump Sum

The formula for calculating compound interest is:
Compound Interest = Total amount of Principal and Interest in future (or Future Value) less Principal amount at present (or Present Value)

C = [P (1 + i)n] – P


C = P [(1 + i)n – 1]

If you’re not a math person, sorry. There are plenty of sites that will explain the formula to you if needed. Investopedia has a good explanation, and it’s also where I grabbed this formula from.

The first number I pulled from Morningstar was the 10-Year Total Return.

VFINX Return History
VFINX Returns

They update their site daily, so the 10-year period would be from the current date to exactly ten years ago. As of writing this, the 10-year period we are looking at here is from 11/13/2009 – 11/12/2019.

The compound interest formula doesn’t give us the whole answer we need. We want to know what principal it would have taken to make 1 million dollars by today. That equates to P + C = 1,000,000

If we combine the two formulas to solve for P, we get
1,000,000 = P [(1 + i)n – 1] – P

Now we get to start plugging numbers into our formula to solve for P. Courtesy of MorningStar, we know i = .1336. The period of time, n, is 10. This part is where Excel comes in handy. I plugged in all the numbers and came out with:

Lump Sum to get $1 Million dollars

If you couldn’t tell already, I like playing with numbers. I experimented a little bit on how various Initial Lump Sum values would change the total value at the end of 10 years.

Lump Sum Variances

You can see that a relatively small change at the beginning results in a rather large change at the end of the 10-year period.

2nd Method: Annual Investing

Okay, I know you’re asking, “Who has that much money laying around, let alone available to invest?” I know I don’t. The more realistic method is to invest the money as it comes in. This would be monthly in my case, but I’m going to do my calculations on a yearly basis. It would be nearly impossible to figure out the monthly returns going back 10 years. MorningStar provides the yearly total return.

VFINX Annual Returns

To do the calculation, I started with an investment of $10,000. I multiplied that with 1+Total Return for the given year. Then I used Excel to do that for each year, adding the annual investment at the beginning of each year. I tweaked the investment rate until I found the magic number that would result in $1,000,000 at the end of 10 years.

VFINX 10 Years of Contributions to 1 Million Dollars

For comparison, I put the total amount contributed at the bottom. You can see that it takes nearly double the amount of money if invested this way. It is much better to make a lump sum investment, but most of us don’t have that option. The lesson learned here is to invest as much money as you can as soon as you can. I think that is one of the benefits of the FIRE movement. It encourages people to do just that. Invest your money early, and let compound interest do the work. It is a powerful financial tool given time.

If you like charts, keep on reading.

Annual Growth Bar Graphs

Investing Annually

Lump Sum

My initial lump sum investment calculations started on 9/12/2009, whereas the annual investment calculations started at the beginning of the year, 01/01/2009. To make it an apple to apples comparison, I did the same math for lump sum that I used for annual investments. I found that 2009’s performance was slightly less than 2019 so far. It would take $296,000 instead of 286,000 to reach $1 million.

VFINX Lump Sum, Start of 2009

One interesting thing I see, is that using the lump sum method, you would have hit over a million at the end of year 9, however, 2018 was a down year. This meant losing $50,000 in 2018. The good news is that 2019 has been excellent so far and you would be at over $1.2 million if you left the money untouched.

In summary, it is possible to have made a million dollars from 2009 to 2019 with some focused investing. You could have either invested a lump sum contribution of $296,000 initially, or invested $50,305 annually (for a total contribution of $503,050). Are you working on saving and increasing your net worth? What will you do financially with your next ten years? If you need some motivation consider reading my post on why you should stop comparing your net worth, and start contributing a lot more.

FIRE Away!