Here's How You Can Turn $40,000 Into $1 Million by Retirement

If you're investing for the long term, putting a large lump sum amount into the market can be an effective way to one day grow your portfolio to over $1 million. The more investing years you have left before you need to pull money out of the stock market, the more time you'll have for your investment to compound and grow over the years.

Plus, the more time you have, the less you'll also need to invest today for it to grow significantly. If you have at least 34 investing years before retirement, I'll show you how you can potentially grow a $40,000 investment today into at least $1 million.

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Investing in tech can be volatile, but the payoff can be massive

Tech stocks are often the most captivating investments to hang on to for the long run. These are companies that are involved in cutting-edge technologies, which can attract investors with their newest products and services. Think of chatbots, robotics, and self-driving vehicles. Companies involved with these types of products are often seen by retail investors as the most exciting ones to invest in because of their potential to disrupt industries and unlock some incredible growth opportunities in the long run.

Picking individual tech stocks and winners in the long run can be challenging, however, which is why an ideal option can be to go with an exchange-traded fund (ETF). The Vanguard Information Technology ETF (NYSEMKT: VGT) is an excellent example of a fund that can make for an effective long-term investment. The fund charges a low expense ratio of 0.09% and gives investors a position in hundreds of tech stocks, ranging from areas such as semiconductors to application software to hardware, and many other areas of tech.

While it has heavy exposure to the big names in tech, including Nvidia, Apple, and Microsoft, which together account for 45% of the ETF's total weight, the fund can put you in an excellent position to generate some terrific gains from the tech sector.

How $40,000 today can turn into $1 million

Over the past decade, the Vanguard Technology ETF has vastly outperformed the market, with total returns (which include dividends) of around 630%, versus just 285% for the S&P 500 (SNPINDEX: ^GSPC). That means that the Vanguard fund has averaged a compounded annual growth rate of 22% during that time frame. That's well above the S&P 500's long-run average of just 10%.

However, I'd caution against assuming that the ETF can continue performing at such a high rate, especially over the very long term. It could be down for a slowdown, and generally, the longer the time frame you're looking at, the less likely it is for the gains to remain that strong, simply because corrections and crashes are inevitable when investing for the long term.

In the table, I've calculated what your investment would be worth at varying growth rates after 30 years, if you were to invest $40,000 today into the Vanguard fund.

Table and calculations by author.

Even at the long-run S&P 500 average of around 10%, you could be on track to get to $1 million after 34 years. And if the Vanguard fund ends up generating even better returns, you could get to the $1 million mark even sooner.

Although there are no guarantees when it comes to investing over any time frame, the Vanguard Technology ETF can make for a great option in the long run because while there may be corrections along the way, you're likely to generate significant returns by simply hanging on to it.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.