I'm sure many readers have an aspiration to one day have a million-dollar ASX share portfolio.
But how hard is it to get to this level with ASX shares if you had a limited amount to invest in the share market each month?
Well, the good news is that it might be easier than you think.
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Building a million-dollar portfolio with ASX shares
Over the last three decades, ASX shares have generated a total average return of 9.6% per annum. And while there is no guarantee that the market will do the same in the future, these returns are in line with historical averages, so it certainly is realistic to target this for our own portfolios.
With that in mind, if you were to commit to investing $500 into ASX shares each month, your portfolio would eventually hit our target thanks to the power of compounding.
But how long would it take?
Compounding really works its magic the longer you leave it. For example, after five years of investing in this way, your portfolio would've grown to be worth $35,000 if it matched the market return.
Quite a modest start, but don't let that put you off continuing to build your wealth. Because after 10 years of doing the same, your portfolio would be valued at almost $100,000.
If we fast forward to the 20-year mark, you can see compounding really starting to strut its stuff. At this point, ceteris paribus, your portfolio will have grown to nearly $350,000.
Compounding is now starting to really get its groove on at this point. So, if you keep going to the 30-year mark (and six months more for good measure), you will have reached your million-dollar destination.
This means that someone starting their investment journey at 20 could have a million-dollar portfolio by the time they're 50 thanks to ASX shares.
It is also worth noting that beating the market, even by just 1% to 2% would speed up the process and cut down the journey. As would putting more into your investments each month.
For example, a return of 10.6% per annum would get you there two years earlier. Or $1,000 a month at 9.6% would turn into $1 million in 23.5 years.
Think you can beat the market and invest more? Well, $1,000 a month with an annual return of 10.6% would get you to one million in approximately 22 years.
The key is to settle on a plan, stick to it, focus on quality ASX shares with competitive advantages, and let compounding do the hard work for you.
