When you first start investing in ASX shares, it may seem like building a substantial portfolio from a modest monthly investment is just a distant dream.
However, history shows that by being patient, consistent, and focusing on quality, it is possible to turn this dream into a reality. And potentially sooner than you think.
Let's embark on a journey to understand just how long it would take to construct a $50,000 ASX share portfolio with an investment of $500 a month.
Investing with the Buffett mindset
Rather than taking a short-term view and dipping in and out of trades, I believe investors would be better off following in the footsteps of an investor like Warren Buffett from Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B).
The Oracle of Omaha has long championed a long-term focus when it comes to investing. In his annual letters, where he often shares the secrets to his success, he has urged investors countless times to focus on quality, long-term growth, and patience. By adopting this mindset, you lay the foundation for a portfolio that stands the test of time and reaps the benefits of compounding.
Buffett's mantra of "Our favourite holding period is forever" highlights the power of patience. In a world where instant gratification often prevails, Buffett's philosophy teaches us that building wealth requires unwavering dedication and a willingness to let time work its magic. And given his success over multiple decades, it can pay to listen to his words.
Building a $50,000 portfolio
If you're starting out with investing in ASX shares and have set a goal of building a $50,000 portfolio, then here's what to expect.
If you were to invest $500 each month in ASX shares with an assumed average annual return of 9.6% (the 30-year average), your portfolio would reach the target amount after just over 6 years of investing. Though it is worth noting that it is impossible to say what returns await us. But this is a realistic goal to work with.
At this point, you could use the funds for a particular need, keep going with the investment strategy, or just let your investment portfolio grow without any further contributions.
In respect to the latter, ceteris paribus, your $50,000 portfolio would double to be worth $100,000 after just 7 and a half years. Whereas if you continued to contribute $500 a month to your ASX share portfolio, it would grow in value to $165,000 over the same additional timeframe. Decisions, decisions!
Overall, I hope this demonstrates how investing in ASX shares can be an incredibly rewarding pursuit.