There's not much you can get for $3 a day these days. However, it could be enough to build a worthwhile passive income stream.
Indeed, just a few short years of investing in ASX dividend shares – or exchange-traded funds (ETFs) housing them – capable of outperforming the market could see one raking in a substantial income within 15 years. Or, at least one large enough to afford me a daily latte. Here's how.
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$3 a day could be all it takes to build a passive income
Start looking under the couch cushions, between car seats, and at the bottom of your backpack for spare change.
Just $3 is all it could take to grow a $30,000 portfolio of ASX shares in less than 15 years – all thanks to the power of compounding.
Not to mention, a $30,000 portfolio could be capable of paying $1,800 of passive income each year, or $4.95 a day, assuming an above-average (but achievable) 6% dividend yield.
That's right, within 15 years, my portfolio of ASX dividend shares could provide a passive income greater than the daily investment I made to build it.
All it would take is a market-beating annual return of 10% annually.
Investing to beat the market
Achieving a market-beating return might sound daunting, particularly for those new to investing.
However, a 10% return is less than 2% greater than the 10-year average return posted by the S&P/ASX 200 Index (ASX: XJO), according to S&P Global data.
I think that by selecting a diverse handful of ASX growth or value shares that I truly understand and believe are capable of succeeding in their sectors, I could meet or surpass my goal.
Having said that, no investment is guaranteed to provide returns or passive income, and past performance isn't an indication of future performance.
Here's how my $3 a day could grow over the years, assuming I receive a 10% return annually:
| Years | $ invested | Portfolio value |
| 1 | $1,095 | $1,098 |
| 5 | $5,475 | $6,690 |
| 10 | $10,950 | $17,459 |
| 15 | $16,425 | $34,803 |
ASX ETFs or shares?
Of course, investing $3 every day on most investing platforms would likely see your cash eaten away by brokerage fees.
Thus, I would probably put my $3 a day into a high-yield savings account until I had a worthwhile sum to invest – say $500 or more. At that rate, I'd be investing once every six months or so.
That's certainly not conducive to building a diverse portfolio. And diversifying a portfolio negates many of the risks involved with investing.
Thus, I'd probably choose to focus my attention on ETFs over individual ASX shares to start with, even if that means having to rebalance my portfolio later to realise greater dividends.
