Yahoo Finance Here’s How Long It Really Takes To Turn $1 Million Into $1 Billion
There are just 2,781 billionaires in the world, but about 59 million millionaires. This shows how difficult the journey between the two wealth milestones can be.
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Here’s how long it really takes to build wealth and turn $1 million into $1 billion.
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How Long It Takes To Turn $1 Million Into $1 Billion
The main factor influencing how long it takes to turn $1 million into $1 billion is where you put your money. The following investment options illustrate that point.
Stocks
The S&P 500 has returned an average of 10.26% annually since its inception in 1957. So what if you were to invest your $1 million into it and just wait? It would take about 71 years to become a billionaire — less if you continue making annual contributions.
That may be too long for you to enjoy billionaire status. But it would likely happen within your kids’ lifetimes, assuming they never touch the money and the S&P 500 matches its historical average.
You could try to speed up the timeline by investing in riskier equities, like individual companies. These are more volatile, which means they have a higher upside but a larger downside. The more patient strategy is the safer one.
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Real Estate
You can become a billionaire a bit faster through real estate, but not by much. Residential properties generate average annual returns of 10.6%. That would theoretically make you a billionaire in 69 years.
Real estate investment trusts do better, with average annual returns of 11.8%. They could turn you into a billionaire within 62 years.
However, this is a riskier option than stocks. While the S&P 500 holds equity in 500 leading U.S. companies across sectors, real estate investments leave all of your wealth in a single industry. That’ll cause problems if housing prices stop going up for an extended amount of time.
Savings Accounts, CDs and Money Market Accounts
If you want to minimize your risk on your path to becoming a billionaire, a certificate of deposit (CD), money market account or high-yield savings account could be your best bet. These all pay you interest for storing your cash with an institution.
The downside to this safety is the lower interest rates. For example, savings accounts generated just a 0.22% average annual percentage yield in 2009. They offer more than that today, but only because federal interest rates are relatively high.
You can find high-yield savings accounts and CDs that offer as much as 6% annually for your cash. However, you can lock in that rate for only so long. This makes it difficult to realistically assess how many years it would take to become a billionaire through savings accounts alone.
But even if you could get paid 6% for your savings annually, it would take about 119 years to turn $1 million into $1 billion. That means your children may not get to enjoy being billionaires, but their children might.
Other Strategies for Building Wealth
Almost anybody who has $1 million can eventually turn it into $1 billion with enough discipline and patience. But you may not want to wait several decades for that to happen. Here are three other strategies you may be able to use to speed up the timeline.
Start a Business
Almost all of the richest people in the world built their wealth by starting businesses. You might not create the next trillion-dollar tech company, but you can generate a steady income through simple local businesses. This can leave you with more money to save and invest so you can build your wealth faster.
Invest In Alternative Assets
You can also invest in alternative asset classes that offer higher potential returns. These include cryptocurrency, collectibles, paintings and even distressed debt. If you get lucky, you could turn a little money into a lot in a short amount of time. Or you could lose everything. That’s the game you play when you invest in asset classes like these.
Pay Off Your Debt and Optimize Your Budget
Finally, you might also consider focusing on your debt for now. Paying off major loans will free up more space in your monthly budget. You can use those extra funds to invest or save more as you pursue your financial goals.
For example, instead of throwing everything you can into the stock market, maybe you should pay off your mortgage first. That might open the door to getting approved for a second mortgage on an investment property, which you could then rent for a passive income stream.
The bottom line is that you need to figure out what works best for your situation when pursuing lofty financial goals like becoming a billionaire. Whatever strategy you select, patience will be important. The faster you try to reach $1 billion, the more risk you’ll have to assume.
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This article originally appeared on GOBankingRates.com: Here’s How Long It Really Takes To Turn $1 Million Into $1 Billion
