From $0 to $100,000: Here's the Investing Strategy That Can Get You There

When you first start investing, getting your brokerage account balance to even $1,000 can seem like a real accomplishment. Getting it to $100,000 can seem almost impossible.

But you don't necessarily need a huge salary, flawless stock-picking skills, or perfect market timing. In reality, you just need discipline, a consistent pattern of investing, and a diversified portfolio of high quality stocks. Give it enough time and you can let the long-term power of compounding do a lot of the work for you.

But the best path to success involves knowing exactly what it takes to get to where you want to be. Saying you want your portfolio to get to $100,000 is all well and good. But understanding exactly how much you need to be putting aside every month and making it happen is the key.

Here's what it takes to reach $100,000

During the past century, the S&P 500 has produced an average annual return of roughly 10%. Some years have generated much higher returns. Some have delivered steep losses. Those who have ridden out that volatility and maintained their long-term focus, however, have been rewarded.

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Let's start with some basic assumptions:

• Your starting balance is $0.
• You invest regularly every month.
• You're able to capture a 10% average annual return.

The last part obviously isn't a guarantee, but we'll keep these examples consistent with history.

If you want to reach $100,000 in 10 years, you would need to invest about $490 per month. That's a relatively quick turnaround to get to the $100,000 mark, but well within reason if you stick with it.

Here's where the math gets a little more interesting. If you want to give yourself 20 years to get to $100,000, you would only need to contribute about $130 per month. Extend your time horizon out to 30 years and the monthly investment needed drops to just $45.

That's the power that comes with investing early and often. Your early investments might yield comparatively little in terms of returns. But once that snowballs over a period of years, it's not long before those compounded returns do far more work than your monthly investments.

Consistency matters more than timing

Investors generally don't have trouble putting their money into the market when it goes up. But doing that when stock prices are falling demonstrates true discipline.

Market corrections of at least 10% are fairly common. On average, they occur once every year or two. Deeper bear markets of 20% or more are much less frequent, but they do happen.

The thing to keep in mind is that while they can be painful, they are ordinary events and you should expect them from time to time. Stock market volatility isn't something investors can reasonably avoid. That's why it's generally best to accept that it's going to happen and continue your periodic investing plans regardless.

Plus, when you buy at discounted prices, you actually give yourself the ability to improve your long-term returns versus trying to time the market.

Your first $100,000 is tough. The second $100,000 is easier.

There's another reason $100,000 is an important milestone.

With that balance and a hypothetical 10% one-year return, your account balance grows to $110,000 regardless of whether you invest another dollar or not. At this point, returns are driving more of your portfolio growth than your investments are.

This is the long-term power of compounding at work. Early on, you're doing most of the work. Later on, your money is doing most of the work.

Plus, you don't need to worry about picking winning stocks. Investing in a low-cost S&P 500 fund, such as the Vanguard S&P 500 ETF (NYSEMKT: VOO), provides the necessary, diversified exposure to help get you there.

Getting to your first $100,000 won't happen quickly. But with consistency and discipline, history will be on your side.

David Dierking has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.