If you are wanting to grow your wealth, then the share market and ASX shares could be the way to do it.
That's because thanks to the power of compounding, a single investment has the potential to grow materially in value.
But how could you turn $10,000 into $100,000 with ASX shares? Let's take a look and see.
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Growing your wealth with ASX shares
As I mentioned above, compounding is your best friend when it comes to investing.
It is what happens when you generate returns on top of returns. It essentially supercharges your returns the longer you leave it.
For example, historically, the share market has delivered an average total return of 10% per annum.
There's no guarantee that this will happen again in the future, but I think it is reasonable to base our assumptions on this level of return for the purpose of this exercise.
If you were to invest $10,000 into ASX shares and generate a 10% return per annum, your investment would become $11,000 after one year and then approximately $26,000 after 10 years.
You're still only a quarter of the way there. So, let's keep going and let compounding do its thing.
If we fast forward another 10 years, your investment would have grown to just over $67,000 if it continued to compound by 10% per annum.
You're now getting very close to your goal. In fact, with compounding now going into overdrive, it would take just a touch over four more years for your portfolio of ASX shares to become worth $100,000.
All in all, that's approximately 24 years of investing to reach your goal.
Getting there quicker
If you can beat the market, which is no easy feat, you could get there sooner.
For example, a $10,000 investment in ASX shares that compounds by 13% per annum would get to $100,000 in 19 years.
But how can you beat the market? Well, one person who has consistently beaten the market since the 1960s is Warren Buffett.
His penchant for buying high-quality companies with sustainable competitive advantages and fair valuations has been one of the keys to his success.
And the good news for Aussie investors is that the VanEck Morningstar Wide Moat ETF (ASX: MOAT) has been designed to allow investors to invest their hard-earned money into the type of shares that Buffett would buy.
Over the last 10 years, the index the fund tracks has generated a market-beating return of 17.06% per annum. This would have turned a $10,000 investment into $48,000. Clearly it pays to follow Buffett's investment style.
