I believe it's possible to become a millionaire with ASX shares even if your portfolio is starting at $0.
The average Aussie has the ability to become millionaire. Obviously the more you earn the better chance you have of becoming a millionaire. But you have to actively save and invest your money.
According to the Australian Bureau of Statistics (ABS), the average employee in Australian earned $1,256.20 a week, or around $65,300 a year. That includes, at one end, the part-time teenager workers up to the high-earning investment bankers and doctors at the other end.
Looking at average earnings is an important starting point for becoming a millionaire in my opinion. In Australia we have the great system of superannuation. All employees are automatically building their wealth thanks to the mandatory super contributions.
Someone earning $65,300 a year would also get 9.5% of that in super, which is $6,203 a year. We can use the Moneysmart compound interest calculator to tell us how much $6,203 turns into over the years. I'm going to use a 10% return, as that's the rough average return for shares over the long-term.
An easy $1 million?
If you're 25 and, for the sake of easy calculations, you contribute $6,203 a year for your whole life into your super fund and it compounds at 10% a year, you'd have almost $2.75 million after 40 years. In 30 years you'd have just over $1 million. You're a millionaire!
So if you're 35, starting with $0, and you just keep adding $6,203 a year to your super then you can reach $1 million. Of course, that's a simplistic calculation. It doesn't include things like tax, franking credits, different earnings over your life and so on.
My point is, nearly everyone can do it if they just keep earning throughout their life and receiving the superannuation contributions.
Investing outside of super
But plenty of people are investing outside of their superannuation fund as well, to supercharge their wealth. That's what I'm doing.
You can invest with as little as $500 into ASX shares in your own name. So it's quite easy to slowly and steadily build a portfolio outside of super.
But there are a few things to try to remember. The share market is volatile – expect your shares to go up and down more than 10% over months or even weeks. You should want to try to limit your trading activity. Every transaction costs brokerage. Every share sale where you've made a gain means you probably have to pay tax on the gain, lowering your net wealth. It's best to try to make long-term investment decisions and hold for at least a few years.
I'm not sure what a realistic regular investment amount is for you. Each budget is different. Perhaps you can afford to invest $1,000 a month outside of super.
If you invest $1,000 a month and your shares return 10% a year then (excluding taxation effects) you'd have a portfolio worth $2.26 million after 30 years. Add in your superannuation savings that I've already mentioned and you're a multi-millionaire!
If you invested $1,000 a month and had no super, it'd take just under 23 years for your wealth to grow to $1 million. I think these numbers are quite achievable for the average Australian household if you generally make frugal choices with your money.
Investment ideas to become a millionaire over time
What ASX shares should you invest in to make returns of 10% (or higher) a year? Well, you could go with high quality fund managers to do the investing for you such as Magellan Global Trust (ASX: MGG), WAM Microcap Limited (ASX: WMI) and MFF Capital Investments Ltd (ASX: MFF).
Quality ETFs are also a way to invest for the long-term. I like ones such as BetaShares Global Quality Leaders ETF (ASX: QLTY), Betashares Global Sustainability Leaders ETF (ASX: ETHI), BetaShares NASDAQ 100 ETF (ASX: NDQ) and Vanguard MSCI Index International Shares ETF (ASX: VGS).
Or you can try to invest in the best individual ASX shares you can find. Ones that I really like right now for the long-term are: Pushpay Holdings Ltd (ASX: PPH), Bubs Australia Ltd (ASX: BUB) and City Chic Collective Ltd (ASX: CCX).
