How I'd drip-feed $450 a month into ASX shares to target a million

Here's what I would do to become a millionaire.

| More on:
A young cool man sits in a private jet wearing headphones and casual clothing.

Image source: Getty Images

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

Key points

  • I could become a millionaire by investing consistently in ASX shares over the long-term
  • Putting $450 per month into growing investments could compound nicely over time
  • It might take 30 years to reach $1 million if my portfolio compounded at 11% per annum

If I were able to save $450 per month to invest in ASX shares, I'd want to aim for $1 million over the long term.

Saving is a bit trickier these days with how much higher interest rates and inflation has gone. Whatever happens next, I believe (ASX) shares will be able to deliver the best chance of good returns.

Businesses have a wonderful ability to compound their profit worth thanks to factors like profit re-investment, population growth and long-term inflation.

A company can grow its profit if it opens a new store, launches a new product or grows into a new country. Population growth means there are more customers. Inflation is an underlying boost for revenue and profit if it can steadily grow prices without providing anything extra to the customer.

How I'd invest $450 a month into ASX shares

Firstly, I'd acknowledge to myself that investing $450 a month is a solid amount, but it's going to take an extended period of time to reach $1 million.

Saving $450 a month translates into $5,400 a year. Assuming no investing and no interest, it would take 185 years to reach $1 million – that's too long!

As someone working full-time, it'd make more sense for me to concentrate on investments that could deliver good capital growth, otherwise I'd be handing over a significant chunk of the return I make each year to the ATO.

'Growth' can mean different things to different investors. I'm not advocating going for the riskiest technology or biotech ASX share, but I'd aim for investments that are delivering solid operational growth at a nice valuation.

If I were just starting out, I would want to choose investments that can provide me with instant diversification, potentially good returns and be a core part of a portfolio.

I really like the investment business Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) which is invested in a variety of businesses and assets across Australia. It has grown its annual dividend every year since 2000.

Vaneck Morningstar Wide Moat ETF (ASX: MOAT) owns a diversified portfolio of US businesses that have strong competitive advantages that are expected by Morningstar analysts to almost certainly endure for at least a decade.

After that, I'd add a few more ASX shares and exchange-traded funds (ETFs) that also offer a good chance of pleasing long-term capital growth such as Wesfarmers Ltd (ASX: WES) and Betashares Global Cybersecurity ETF (ASX: HACK).

Capital growth calculations

I believe that the above four names I've mentioned will be able to deliver an average capital growth return, excluding dividends, of at least 10% per annum over the long term. We can conservatively add an average 1% dividend yield to the return as well, in my opinion.

If I invested $450 per month and my portfolio makes an average of 11% per annum, I could get to millionaire status in 30 years.

While that's not exactly a short amount of time, I'd say it's pretty good considering I'd only be investing around $5,500 per year. Remember, just saving it all in cash would have taken over 180 years.

Motley Fool contributor Tristan Harrison has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended BetaShares Global Cybersecurity ETF and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended BetaShares Global Cybersecurity ETF, Washington H. Soul Pattinson and Company Limited, and Wesfarmers. The Motley Fool Australia has recommended VanEck Morningstar Wide Moat ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Woman relaxing on her phone on her couch, symbolising passive income.
Dividend Investing

How to choose ASX shares for passive income

These three factors help me pick stocks for dividends.

Read more »

A business woman looks unhappy while she flies a red flag at her laptop.
Share Market News

These are the 10 most shorted ASX shares

Let's see which shares short sellers are targeting this week.

Read more »

Happy man working on his laptop.
Share Market News

5 things to watch on the ASX 200 on Monday

A subdued start to the week is expected for Aussie investors.

Read more »

A happy male investor turns around on his chair to look at a friend while a laptop runs on his desk showing share price movements
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

A laughing woman pushes her friend, who has her arms outstretched, in a supermarket trolley.
Broker Notes

Coles share price holds firm while Woolworths tumbles 18% in 2024. Time to buy?

We canvas the views of a few top brokers on whether Coles shares are a good buy today.

Read more »

Young people shopping in mall and having fun.
Opinions

I'd buy these ASX retail shares if economic fragility starts a fire sale

An economic hiccup could present a golden opportunity to buy these quality retailers.

Read more »

Man holding Australian dollar notes, symbolising dividends.
Opinions

An ASX dividend giant I'd buy over NAB shares for 2024

I think this ASX dividend gem is well-placed to boost its income payouts in 2024 and beyond.

Read more »

Two fists connect in a surge of power, indicating strong share price growth or new partnerships for ASC mining and resource companies
Share Market News

Here's how the ASX 200 market sectors stacked up last week

ASX utilities and energy shares both rose by more than 4% last week.

Read more »