With $1 million, you need to think in terms of a portfolio even if you have nothing else put away (though odds are, you do, unless you won the lottery.) How you build your portfolio ultimately depends on your goals, needs and risk tolerance.
If you’re a conservative investor or you’re nearing retirement, you may put more money into bonds than you would stocks. If you’re a young investor, you may choose riskier investments like stocks and real estate.
This is how a $1 million investment portfolio might look for someone nearing retirement:
Investment type
Percentage
CDs, bonds and government securities
50% to 60%
Stocks, ETFs and mutual funds
40% to 50%
Real estate and alternative investments
0 to 10%
To make the most of your investments, you may need a new brokerage account.
How $1 million can grow
With $1 million in the right investments, even if you save nothing more, you can quickly get into the kind of numbers that represent lasting financial security. In 15 years, you can top $4 million, and you could retire and live on part of your annual proceeds while keeping your principal intact. That’s true even if you’re not all in higher-risk investments like stocks (and it’s safe to say most financial advisors would advise against that.)
Here’s a look at how $1 million might grow in three common investment classes.
$1,000,000 saved or invested
Savings account
Bonds
Stocks
1 year
$1,040,000
$1,053,300
$1,100,000
5 years
$1,216,653
$1,296,464
$1,610,510
10 years
$1,480,244
$1,680,819
$2,593,742
15 years
$1,800,944
$2,179,121
$4,177,248
20 years
$2,191,123
$2,825,151
$6,727,500
25 years
$2,665,836
$3,662,706
$10,834,706
30 years
$3,243,398
$4,748,567
$17,449,402
For this table, we assumed a 4% annual return on a high-yield savings account, CD or money market fund; an average 5.33% return for a bond portfolio, based on Vanguard’s historical return data; and 10% on stocks, the market’s long-term annual return. Bond returns vary widely based on bond types, and the stock market has down years while individual stocks can go to zero. So consider these benchmarks only and consider risk as well as return.
Before you invest $1 million
Before you invest $1 million, consider the following:
Give to charity. Make giving part of your financial plan by donating a small percentage of your wealth to the charities and organizations you care about.
Save for your kids’ college fund. If you plan on helping your kids pay for college, set up 529 college savings plans.
Build an emergency fund. You’ll need three to six months of expenses in a high-yield savings account, so you don’t have to turn to your investments or credit in an emergency.
Create a vacation fund. Pay for your next adventure in cash by keeping a vacation fund in a high-yield savings account.
1. Invest with a financial adviser
With $1 million in hand, you may opt to work with a financial adviser versus doing it alone.
Pros
Years of expertise. Financial advisers have specialized knowledge covering financial planning, estate planning, tax-efficient withdrawal strategies and more.
Person-to-person support. Unlike robo-advisors, a financial adviser is there to answer complicated questions, meet with you face-to-face and give you advice based on your unique financial situation.
Cons
Some work on commission. Unless you seek out a fee-only fiduciary adviser, some may offer biased suggestions and try to sell you products you don’t need.
Takes time to find the right one. You’ll need to research and interview several financial advisers until you find an unbiased one that doesn’t work on commission.
Our pick for a financial advisor: J.P. Morgan Personal Advisors
INVESTMENT PRODUCTS ARE: NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE. Finder receives compensation when you click or tap through to, open an account with or provide your contact information to J.P. Morgan Wealth Management.
2. Invest in low-cost index funds
Broaden your market exposure and lower your risk by investing in low-cost index funds.
Pros
Passively managed. Index funds track the movement of a stock index, such as the S&P 500, so you don’t have to actively manage it.
Lower fees. Because you’re not actively buying and selling, less money goes to cover fees and expenses.
Typically outperform actively managed funds. Historically, low-cost index funds outperform actively managed funds over the long run. And the risks are lower.
Cons
Investments are unclear. Index funds frequently change, making it hard to pinpoint exactly what shares you own.
Produces average results. An index-fund mimics the market, so its performance will never exceed it.
It follows the market. Index funds play to your advantage when the market is improving, but they work against you when the market goes down.
3. Invest with angel investing
Help a budding startup become the next big thing by offering your money and expertise.
Pros
Attractive returns. If a startup is successful, you could earn huge capital gains in the future.
Crowdfunding site options. Many equity crowdfunding sites have thorough vetting processes and let you diversify by investing in multiple startups.
May have partial control over the business. If you’ve run successful companies in the past, you may be able to influence some of the startup’s decisions.
Cons
Extremely risky. As the saying goes, over half of new businesses fail, so you could easily lose your investment if the startup goes under.
You don’t get repaid. The money you give to a startup is an investment, not a loan. They’re under no obligation to pay you back if the company isn’t successful.
Requires thorough vetting. Increase your chances of success by thoroughly vetting startups and only choosing those that have a proven track record for growth.
4. Invest in high-quality stocks
Invest in high-quality stocks by purchasing shares of stable companies that have higher profit margins and lower debt.
Pros
Stability. High-quality stocks are less volatile than stocks from small and mid-sized companies.
Passive income. Invest in high-quality stocks and you could earn passive income as the company pays dividends to shareholders.
Liquidity. The stock market is open daily, so you can quickly sell shares when you’re ready.
Cons
Slower growth. High-quality stocks are known for their stability, but the downside is that they’re not likely to grow as fast as other stocks.
High stock prices. A single share of high-quality stock could cost hundreds or thousands of dollars.
Must know how to evaluate stocks. You’ll need to research each company’s financial statements to determine which ones are considered stable.
5. Invest through real estate crowdfunding platform
The digital age has made it easier than ever to invest in real estate through crowdfunding platforms without having to deal with the headaches of property management. Though with $1 million, owning a property outright is certainly possible.
Pros
Comprehensive investment options. You get access to offices, retail spaces, hotels and multifamily units across the country when you invest through a crowdfunding platform.
Diversification. Real estate isn’t directly correlated to the stock market, so it’s a great way to diversify your overall portfolio while still earning high returns.
Passive income. Receive a steady cash flow as tenants make rental payments and the property appreciates in value.
Cons
Long-term investment. A tangible asset like real estate can’t be readily converted to cash, so most crowdfunded investments have targeted holding periods.
Carries risk. Real estate investments are backed by a single asset, which means you could lose money if something happens to it.
Cash flow depends on the investment. You may see instant returns when you invest in an apartment complex, but you may not see returns for years if you invest in a building renovation.
Compare investment platforms
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Bottom line
There are an endless amount of ways you can invest $1 million. Before you invest a dime, take time to consider your goals and risk tolerance. Once you’ve narrowed down your options, compare investment accounts until you find one that suits your needs.
Frequently asked questions
The amount of interest $1 million will earn per year depends on the interest rate applied to the money. If the interest rate is 4% for the entire year, $1 million could earn $40,000 in interest.
Many brokers cap the amount you can deposit into a brokerage account, so it could take several days to deposit and invest $1 million. The amount of time it would take to invest to earn $1 million is another question. This would depend on how much you contribute and how often and the performance of your investments.
According to the rule of 72, a formula to calculate how long it'll take to double an investment at a specified rate of return, $1 million would need 7.2 years to double, assuming a 10% annual interest rate.
Ron Prichard is managing editor of news production and operations at Pitchbook and a former news editor at Finder, specializing in investments. Ron wrote, edited and built tools at Microsoft News and MSN Money for more than 20 years. He holds a BA in journalism from California State University, Long Beach.
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