If you want to become a millionaire, then the Australian share market could be the place to do it.
Sure, winning Powerball would be quicker, but the odds are stacked firmly against you with that.
Whereas ASX shares have historically shown that making a million is achievable.
How to turn $20,000 into $1 million with ASX shares
Turning $20,000 into $1 million is not as hard as it might sound, thankfully. In fact, perhaps the hardest part will be having the discipline to stick with your investment strategy through thick and thin to achieve your goals.
So, what is the strategy? Well, the first step is to make an initial investment into a high-quality group of ASX shares.
The second step is making smaller annual investments.
Thirdly, we need to let compounding works it wonder.
Finally, the fourth step is cross our fingers that the ASX shares continue to deliver strong returns for investors like they have done over the last 30 years.
While this is far from guaranteed, the share market's return of 9.6% per annum during the period is in-line with historical returns on Wall Street, so is certainly a realistic proposition.
The maths
If you were to invest $20,000 into ASX shares, then made an annual contribution of $5,000 for just over 28 years, and earned the market return, your portfolio would grow to be worth $1 million.
It is also possible to speed up the process if you have more capital to sink into the share market.
For example, if you could make annual contributions of $10,000 instead of $5,000, you would get there in just over 22 years.
Have even more capital at your disposal? If you start with a $30,000 investment and then add $20,000 a year to your portfolio you could reach your goal after 17 years.
Don't have as much capital to employ but have time on your side? No worries!
Investing $5,000 into ASX shares and then $5,000 each year would get you to $1 million after 31 years if you earned the target 9.6% per annum return.
Final word
Overall, starting with $20,000 and growing your portfolio to $1 million is entirely possible. You just need a combination of discipline, high-quality ASX shares, time, and compounding.
