Want to be a millionaire with shares? It’s easier than you think

Credit: Richard S

I’m sure nearly everyone reading this article would like to grow their net worth by $1 million. If you’re in your 20s you may think that becoming a millionaire is impossible.

Not so, I say!

MoneySmart has a lot of wonderful tools and calculators to help you work out money scenarios. One of my favourite calculators on the website is the compound interest calculator.

If you want to become a millionaire with cash you have to contribute most of the money yourself.

With shares, time and compounding can do an enormous amount of the work.

If you start with $1,000 and add $500 a month for 30 years whilst achieving the long-term market return of say 10%, you’ll have just over $1 million.

Starting with $1,000 is not much at all.

Adding $500 a month throughout the entire period, not including any increase to contributions would hopefully be easy to do.

Generating a 10% return a year should be achievable with just a low-cost quality exchange-traded fund (ETF) like Vanguard US Total Market Shares Index ETF (ASX: VTS) or iShares S&P 500 ETF (ASX: IVV). Other globally-focused funds like MFF Capital Investments Ltd (ASX: MFF) and Magellan Global Trust (ASX: MGG) could also likely achieve that return.

If you increased that monthly addition to your portfolio to $1,000 a month then you’d have almost $2 million after 30 years.

If you manage to choose high-performing individual shares that deliver a return of more than 10% per annum then you could really supercharge your returns.

Foolish takeaway

All of these calculations are based on 30 years. A 25 year old could easily be a millionaire by 55. It’s not too late for a 35 year old to start investing and be wealthy by the time they’re 65. Sounds pretty easy, right?

If you’re looking to beat returns of more than 10% per year then I’d suggest you buy one of these hot stocks for your portfolio.

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Motley Fool contributor Tristan Harrison owns shares of Magellan Flagship Fund Ltd and MAGLOBTRST UNITS. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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