S&P/ASX 200 Index (ASX: XJO) shares have a lengthy track record of helping patient investors build retirement wealth over time.
The future remains uncertain by definition. But history supports the wealth building benefits ASX 200 shares have provided for long-term investors.
Just have a look at the S&P/ASX 200 Gross Total Return Index (ASX: XJT), which includes all cash dividends reinvested on the ex-dividend date.
The Total Return Index is up 27% over the past four years, for an annual return of 6.75%.
That's a solid return.
But, atop reinvesting those dividends and taking advantage of the franking credits wherever possible, I'd aim to beat those returns.
How?
Research the top ASX 200 shares
I'd do some in-depth research or seek some advice and invest in companies with great management, huge barriers to entry, and excellent long-term growth potential.
Leading ASX 200 shares like BHP Group Ltd (ASX: BHP), for example. Atop gaining 30% over the past five years (6% annual average return), BHP shares pay out regular dividends and trade at a current trailing yield of 6.1%.
And I'd be sure to diversify my stock holdings into a range of companies operating across different markets.
Like ASX 200 retail stock JB Hi-Fi Ltd (ASX: JBH) as another example.
The JB Hi-Fi share price is up 68% over five years, for an average annual gain of 13.6%. And that's not taking into account the retailer's juicy dividends. JB Hi-Fi shares trade on a trailing yield of 7.0%.
So, while my goal of 10% annual returns is ambitious, I believe it's certainly achievable.
Now, let's crunch some numbers.
Building up to that retirement nest egg
For the purpose of this article, I'm going to assume that I have $10,000 to invest in ASX 200 shares today. (I do.)
I'm also going to assume I'm 30 (I'm not!). And that I aim to retire a bit early at the age of 65.
That would give me 35 years to let the magic of compound interest work for me.
Here's what my trusty compound interest calculator tells me.
With 10% forecast annual returns from my $10,000 investment in ASX 200 shares today, I'll have $27,070 in 10 years.
In 20 years, that will have grown to $73,281.
In 30 years, that will be $198,374.
And by the time I'm ready to hang up my hat and take it easy 35 years from now, my initial $10,000 investment will have ballooned to $326,387.
