ASX shares can help millennials retire before their parents

ASX shares could be the best investment to help millennials retire before their parents. You just have to invest wisely.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ASX shares can help millennials retire before their parents.

There are a lot of people out there that have not been building up their retirement nest enough to be able to retire comfortably at 65, perhaps not even by 70.

I don't know every family tree out there. If you're a millennial who has parents who are about to retire in 2021 I'm not sure I can help. But the younger millennials – those born in the mid 1990s – have the potential to beat their parents to retirement if they work hard at it. I think ASX shares are key.

Why are ASX shares the answer?

I believe that most asset classes offer very little potential for long-term wealth growth. Cash and bonds offer very little return due to the RBA's ultra low interest rate.

I think capital city property could be permanently changed by the coronavirus crisis. More people may decide to rent than buy with cheaper rental prices (lowering demand for property buying). Immigration could be low for a long time. Interest rates can't really go any lower. People may want to avoid big cities and live in small regional areas.

ASX shares on the other hand are great for millennials to invest in. The purchase costs are very low (think how expensive stamp duty and other buying fees are). You can start with as little as $500, whereas you need a huge cash deposit for a property. Most of those property return calculations don't include the costs of purchasing. Think of other costs of negative gearing, the loss of money when the property is vacant and so on. These usually aren't included either.

Plenty of millennial parents may be invested in the wrong assets at the moment.

Which investments would be good ideas?

Not every ASX share investment is a good idea. Expensive and poor performing investment managers are drains on your potential wealth. Plenty of people just own mature, low-growth businesses like Commonwealth Bank of Australia (ASX: CBA), Telstra Corporation Ltd (ASX: TLS) and Woolworths Group Ltd (ASX: WOW). These probably won't do much over the 2020s. 

It's growth that will make the biggest difference. Individual ASX shares like A2 Milk Company Ltd (ASX: A2M), Pushpay Holdings Ltd (ASX: PPH), Brickworks Limited (ASX: BKW), Bubs Australia Ltd (ASX: BUB) and Altium Limited (ASX: ALU) are names that I think could be much bigger businesses in five years.

There are some listed fund managers that I think have a very good strategy. Does their style mean they're likely to produce strong returns over the long-term? Some ideas are: WAM Microcap Limited (ASX: WMI), MFF Capital Investments Ltd (ASX: MFF), Magellan Global Trust (ASX: MGG) and PM Capital Global Opportunities Fund Ltd (ASX: PGF).

Many millennials find the easiest way to invest in shares on the ASX is in low cost exchange-traded funds (ETFs). Some examples are: BetaShares Australia 200 ETF (ASX: A200), iShares S&P 500 ETF (ASX: IVV) and Vanguard MSCI Index International Shares ETF (ASX: VGS).

How fast could a millennial retire?

I'm not sure how much your finances would be able to invest. But let's say you make it a big goal in you're life and you're able to achieve returns of 10% a month with ASX shares. According to Moneysmart if you were aiming for $1 million in 20 years (to beat your parents) you'd have to invest around $1,325 a month. Obviously if you invested more, or made better returns, then you could return quicker.

I think that's entirely possible for two-adult household who diligently saved and invested each month.

Tristan Harrison owns shares of Altium, Magellan Flagship Fund Ltd, MAGLOBTRST UNITS, PM Capital Global Opportunities Fund Ltd, and WAM MICRO FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of BUBS AUST FPO. The Motley Fool Australia owns shares of and has recommended Brickworks, PUSHPAY FPO NZX, and Telstra Limited. The Motley Fool Australia owns shares of A2 Milk and Altium. The Motley Fool Australia has recommended BUBS AUST FPO and Vanguard MSCI Index International Shares ETF. 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.

More on ⏸️ ASX Shares

a woman wearing a close-sitting hat featuring wires and thick computer screen glasses clutches her computer monitor and looks shocked and disturbed as she reads old-fashioned computer text from the screen.
Technology Shares

Here's why ASX 200 tech shares (ASX:XTX) outperformed today

ASX tech shares have taken a turn for the better today.

Read more »

Worker in hard hat looks puzzled with one hand on chin
Resources Shares

Why did the Rio Tinto share price (ASX:RIO) have such a lousy 2021?

We look at what happened to this ASX 200 mining giant's shares last year

Read more »

a miner wearing a hard hat smiles as he stands in front of heavy earth moving equipment on a barren mine site.
Share Gainers

Here's why the Rumble Resources (ASX:RTR) share price is climbing 5%

The mineral explorer's share price is on the rise amid promising drill results.

Read more »

share price high, all time record, record share price, highest, price rise, increase, up,
⏸️ ASX Shares

Here are the top 10 ASX 200 shares on Wednesday

Here are your top 10 biggest gainers in the ASX 200 on Wednesday.

Read more »

comical investor reading documents and surrounded by calculators
⏸️ ASX Shares

The ASX reporting wrap-up: WiseTech, Bravura, Seven Group

Just what the investor ordered. Here’s a recap of the companies that reported on Wednesday...

Read more »

Doctor performing an ultrasound on pregnant woman
⏸️ ASX Shares

The ASX reporting wrap-up: Ansell, Kogan, Nanosonics

Just what the investor ordered. Here’s a recap of the companies that reported on Tuesday...

Read more »

blue arrows representing a rising share price ASX 200
⏸️ ASX Shares

Here are the top 10 ASX 200 shares on Tuesday

Here are your top 10 biggest gainers in the ASX 200 on Tuesday.

Read more »

unhappy investor considering computer screen
Share Market News

The ASX reporting wrap-up: Charter Hall, Ampol, NIB Holdings

Just what the investor ordered. Here’s a recap of the companies that reported on Monday...

Read more »