Want to Build a $1 Million Nest Egg? Here's Exactly How to Get Started

To be perfectly clear, there isn't just one correct way to build wealth. Some people get rich by starting their own business, some inherit their nest eggs, and others get wealthy in unique ways, such as by collecting fine art or by trading cryptocurrencies.

Having said that, there is one way of building wealth that is a more surefire path to a $1 million nest egg than any other -- long-term, buy-and-hold investing. Specifically, in the stock market. But many people are hesitant to put their money into stocks, don't know how to get started, or both.

The most reliable millionaire maker

Many people are hesitant to put their money into stocks, and that's especially true among the younger generations. And it's not a surprise. Many people who are in their 30s today watched their parents lose a fortune in both the dot-com meltdown of the early 2000s and the financial crisis of 2007-2008.

However, there are a few very important factors to keep in mind:

• Stock market crashes, recessions, and other turbulent events are a natural part of long-term investing.
• A properly constructed investment portfolio should do just fine over the long run, regardless of what the market does over the next few months or years.
• Over the long run, the stock market as a whole has averaged returns of about 10% per year.

It's absolutely true that many investors lost everything when the dot-com bubble burst, or when the housing collapse led to the Great Recession. But those were people who were taking unnecessary speculative risks, were investing with borrowed money, or who put all of their money into just a couple of stocks.

The right way to get started

As mentioned, there is no perfect way to invest. But if I were to start today on a path to building a million-dollar nest egg, here are the steps I would take.

First, open a brokerage account. If you're investing for the long term, the best way to do this is with an individual retirement account, or IRA, which offers excellent tax benefits. But you can also open a standard (taxable) brokerage account if you don't necessarily want your money tied up.

Second, set up an automatic contribution on at least a monthly basis. For 2024 and 2025, the annual contribution limit to an IRA is $7,000 ($8,000 if you're 50 or older), so keep this in mind. But the best way to set yourself up for investing success is to make it as automatic as possible.

Third, invest your money in a portfolio of low-cost index funds. A basic S&P 500 index fund is a great way to get started, and there are index funds that can let you invest in many different types of stocks without having to choose individual companies. Alternatively, use a broker with a robo-advisor service that can construct an appropriate portfolio automatically.

Are you ready to get started? Click here for our up-to-date list of the best places to open an IRA right now.

Start like this, then customize your approach

If you're interested in investing in individual stocks, and have the time, knowledge, and desire to learn how to do it correctly, there's nothing wrong with that. In full disclosure, the bulk of my investment portfolio is in about 40 individual stocks. But starting with simple index funds can set you on the path to financial success and can create a solid backbone to your investment portfolio while you learn.