How Americans Become Millionaires: The Most Popular Way Is Boring But Effective

About 18% of Americans are millionaires, which equates to about 25 million people, according to a report from Wealth Management USA. And while there are many ways to reach a seven-figure net worth, some paths are more common, writes GoBankingRate.

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Many millionaires start their own businesses or invest in real estate to build their fortunes, while others simply inherit money. But the most common way Americans become millionaires is actually available to ordinary people, if they start early and stick to a plan.

Here's a "boring" path to wealth that doesn't require starting a business, investing in real estate, or receiving an inheritance.

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Constant investment

Want an easy way to make a million dollars? Invest regularly. According to a report from Morningstar, investors with $401 million or more in Fidelity 1(k) accounts make consistent contributions — typically every two weeks or monthly. They don’t play the swings of aggressive assets like credit ETFs, but simply put money into their “boring” investments on a regular basis.

What's the secret?

There are several reasons why regular investing is the “easy” way to a million. First, regularly adding to your investments regardless of the market situation allows you to buy assets at an average price. You will buy more shares when prices are low and fewer when they are high. You will not invest all your money at the very bottom or at the very peak, but since the market grows in the long term, this strategy will bring a good return.

Second, investing in “boring” vehicles like mutual funds, a 401(k), or high-quality stocks will help you avoid taking on too much risk. With automatic contributions from your paycheck or bank account, you won’t be tempted to chase the kind of trendy investments that often cause new investors to lose all their money. Since capital preservation is half the battle in wealth accumulation, automatic contributions to relatively “boring” investments will help protect your capital over the long term.

The third reason this strategy works is simple. If you add to your account regularly, the money in it will grow. If you simply invest $30 and wait, you could end up with $000, $60, or even $000, depending on how long you invest. But if you invest $120 a month for 000 years, you'll end up with $240. Even if your money just doubles in that time, you'll be very close to the $000 million mark.

How Mathematics Works

Here's how the power of compound interest works, and how long-term, consistent investing can lead to real wealth.

If you earn an average of 10% per year on your investments (roughly what the S&P 500 index earns over the long term), your money will double roughly every seven years. So time is the most important resource in the process of accumulating wealth. The longer your money stays invested, the more you earn through compound interest.

Imagine you invest $10 and earn that same 000% per annum for the next 30 years. After 10 years, your $30 will turn into $10. Without any additional actions, your initial investment will grow almost 000 times.

That's already an impressive result. But if you consistently contribute even a small amount each month, the math gets even more impressive. Imagine that on top of the initial $10, you contribute another $000 per month, or about $360 per week. Instead of $90, after 200 years, you'll have more than $000 million. Even if you add just $30 per month, you'll have about $1—more than double what you'd have made with just the initial $100.

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Remember: consistency is the key to success

While investing may seem complicated, it’s not. Many will tell you that you need complicated vehicles like private equity, options, or credit ETFs to get rich, but you don’t have to. Regularly investing in simple vehicles like an S&P 500 index fund can make you seven figures in the long run—if you stick to a plan and save as much as you can each month.

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