On our Minds: The First $100,000

When my wife and I started investing together, we kept hearing that our first goal should be to hit $100,000 – and that the sooner we got started, the better. Now we know why.

The first $100,000 is the hardest, Charlie Munger famously observed in the 1990s. But since Warren Buffet's business partner first made his point, the satisfyingly round figure has taken on a life of its own. Ask experts and everyday investors, scroll through TikTok or Reddit, crack open a book on personal finance, and you're liable to learn that there's something magical about hitting six figures.

It's more than just an impressive milestone. It's a realistic goal for new investors – with nearly a quarter of American millennials reporting $100,000 in savings, according to a recent Bank of America report. That measurable dollar figure can provide the motivation we need to build wealth when goals like retirement seem too distant to conceive. But another reason some new investors set their sights on $100,000 is that that's where many notice their investments take off, thanks to compounding.

Here's an example. Say you start an investment that earns you 2.5 per cent interest annually – perhaps a hypothetical high-interest savings account – to which you add $1,000 every month. Starting from zero, you'd hit $100,000 in 7.5 years. Not bad! But then you'd make your next $100,000 in 6.4 years. And the next hundred grand in just 5.4, and so on. The leap from $900,000 to $1,000,000 would take just 2.8 years.

This works for other investment types, as well. If you invest in dividend-paying individual stocks, mutual funds or exchange-traded funds (ETFs), your holdings can compound when you reinvest those earnings. (Bonus points if you reinvest them automatically.)

Looking back, it's hard not to wish I had started investing earlier, like my wife did. I opened a portfolio when I was around 30 years old. Using the model from our previous example, had I started investing at 20, I would have potentially made $135,720.67 within a decade – and spared 30-year-old me the challenging work of catching up.

Still, I feel nothing short of fortunate. Years after my wife and I got started, $100,000 is just on the horizon. The question is: what do we do when we finally get there?

Investing after $100,000

What we do next will depend on our individual circumstances, but I've learned that there are some basic truths we can consider once we've amassed our first $100,000.

For one, you may also notice that fees associated with some holdings, like mutual funds or exchange-traded funds (ETFs), are more noticeable than when you started. I admit: I tended to uncritically gloss over relatively high fees in my early investing days. The fees rarely exceeded the cost of a single night out. But now, even if your management fees average a modest one-per-cent annually, that means you have to be comfortable with paying $1,000 on a $100,000 portfolio. Now's a good time to decide if a fund's potential is worth the costs it incurs, especially if you're looking long-term.

A lot may have changed in the years since you started investing. For example, we purchased a property and welcomed a child into our family, prompting us to reexamine our rate of investment, timeline and investment types (hello, education fund). For you, that could mean a new rate of pay, an unexpected windfall or expense, a change in health, or a lifestyle update. Whatever's different, you can take steps to ensure your risk tolerance, profit expectations and goals shift accordingly.

Speaking of goals: $100,000 is a great number to shoot for, but you may consider defining your investing endgame in more concrete terms – that is, beyond a dollar amount. Again, it's something I wish I had done sooner. If you haven't already, ask yourself: Are you investing for retirement? A property? Something more near-term? Adding specificity to your goals can help motivate you to keep going and provide some food for thought the next time you face an emotional buy or sell decision.

Of course, no judgment if you simply decide to start working toward your next $100,000. Good luck.