The most boring (but effective) ways to become a millionaire

While investing in cryptocurrency or meme stocks may be exciting, it can prove to be a risky strategy. 

These investments may provide the opportunity to get rich quickly, but experts say that it is often the most boring strategies that pay off over the long term. 

Playing it safe and sticking to the basics can be the best way to build wealth over time, Money.com reported. 

In fact, combining three dull - but highly effective - strategies can make you a millionaire after 30 years, with just $500 a month invested. 

We run through the details below. In a nutshell, stick to sensible funds linked to the S&P 500, invest the same amount each month and don't try to time when to buy and sell and make use of the magic of compound interest. 

Read More

Million Dollar Listing star JOSH FLAGG explains how interest rate cut will impact homebuyers

Index funds

The first strategy is index fund investing, according to Money.com. 

While picking stocks can be fun, timing the market is exceptionally challenging - even for the experts. 

In the first half of 2024, 81.8 percent of actively-managed funds failed to outperform the S&P 500 index, according to analysis of Morningstar research by The Wall Street Journal. 

In the last decade, almost 73 percent failed to beat the index, the outlet found. 

Over the past 30 years, the S&P 500 has had an average yearly return of 10.52 percent. 

'When you pick stocks you're displaying confidence that you somehow have knowledge that the rest of the market didn't bake into the price of an investment,' Brenton Harrison, a financial advisor and founder of advisory firm New Money, New Problems, told Money.com.

Instead, investing in index funds means you do not have to choose.

An index fund is an investment fund which tracks the performance of a market index, such as the S&P 500 or the Nasdaq Composite, by holding the same stocks or a representative sample of them. 

'These funds allow you to spread your investments out, increasing the chances that if one sector of the index struggles, another will hold up,' said Money.com.

'That's the power of diversification, which index fund investing provides all in one place.'

Dollar cost averaging 

Another strategy is so-called 'dollar cost averaging.'

Although this may sound complicated, you are already using this strategy for building long-term wealth if you contribute to a 401(K) workplace retirement plan.

Dollar-cost averaging involves investing a certain amount of money at regular intervals, regardless of what is happening in the market at any given time. 

The ideal investing strategy is to buy when prices are low and sell when they are high. 

But, again, timing the market is extremely difficult and risky. 

Investing at regular intervals instead takes away some of that risk.

Morningstar analysis last year showed that over the course of 21 years, buy-and-hold portfolios outperformed market-timing portfolios by 10 percent. 

'Dollar-cost averaging is one of the best financial tools that a person can use because it takes human error out of the investing process,' Harrison said.

'Instead of you feeling like you have the ability - which we don't - to time the market, it gives you the best opportunity to get the best cost for your investment.'

Compound interest

Taking advantage of compound interest is also the key to building wealth. 

Put simply, compound interest is the interest you earn on interest. 

For example, if you invest $100 and it earns 5 percent interest each year, you will have $105 at the end of the first year. This larger sum will then earn 5 percent interest, taking your total to $110.25 at the end of the second year.

Over the years, this will continue to snowball and grow at an increasing pace as you earn interest on an ever-larger account balance.

One way to take advantage of this compounding is by setting up a dividend reinvestment plan, according to Money.com. 

Shortened to DRIP, this entails automatically reinvesting any dividends you receive from stocks or funds that you own.

'Dividend reinvestment is an easy way to have something where it's building upon itself,' Harrison said, as a DRIP means you are increasing the force that your account is growing with. 

For example, a $100,000 investment made in 1990 in a fund tracking the S&P 500 would have grown to more than $2.1 million by the end of 2022 if dividends were reinvested, according to Charles Schwab. 

If you remove the dividend reinvestment, the same investment would only have grown to $1.1 million - or just over half as much - the financial services company found. 

Three boring strategies combined 

When combined, these three strategies are capable of producing eye-catching results, Money.com said. 

Say you invest $500 every month in an index fund with a compound annual growth rate of 10 percent, and that fund pays a quarterly dividend.

In 30 years, you will have amassed over $1 million, according to a calculator provided by the US Securities and Exchange Committee.