Becoming a millionaire may be a goal of many Aussies under the age of 50, as it could unlock a great lifestyle, or even allow someone to retire early.
If given enough time, good shares can deliver excellent returns for investors. If an investment delivers an average return per annum of 10%, it can double in value in less than eight years. That means someone with $10,000 invested in something compelling could turn it into $20,000 in less than a decade.
But what if someone diligently invested every month, allocating a sizeable amount into their portfolio? Then, it may be possible to reach $1 million by 50 years old, or perhaps earlier.
It may be tricky for some Aussies to find savings at the moment due to the high cost of living. But, if people can put some money aside some months/every month, it could grow into a much larger figure in the future thanks to compounding.
Let's examine how much Aussies of different ages would need to save to reach $1 million by 50. I'm going to assume a return of 10% per year because that's roughly what the global share market has returned over the last 10 to 15 years, including a few bumps along the way.
20-year-old
A 20-year-old has a lot of time on their side, so that allows for more time for investment compounding to work its magic. The more time investments have to grow, the less money that's needed to be allocated.
If they invested $507 per month for 30 years and it grew by an average of 10% per year, it'd reach $1 million by the time they became 50. If they invested more per month at some point during that journey, they'd become even wealthier by 50.
30-year-old
A 30-year-old still has two decades of time for compounding to help grow their portfolio.
If someone invested $1,456 per month and it returned an average of 10% per year, it'd grow into $1 million by the time they are 50.
40-year-old
It's certainly true that 40-year-olds don't have too long until they reach an early retirement age goal of 50. But there are a couple of things on their side.
First, ten years is still a long time. As I said in the introduction of my article, an investment can double in size after eight years if it achieves an investment return per annum of 10%.
Second, 40-year-olds may be entering the prime earning period of their lives if they're not already. Life expenses may be high, but hopefully, the income will be high as well.
If someone who is 40 invests $5,229 per month and that money achieves an average return per annum of 10%, then it could grow into $1 million by the time they're 50.
Some investments I'd use
I believe the global share market is an excellent place for Aussie investors to invest, so I'd consider diversified investments such as the Vanguard MSCI Index International Shares ETF (ASX: VGS), the VanEck MSCI International Quality ETF (ASX: QUAL), or the Betashares Global Quality Leaders ETF (ASX: QLTY).
These funds are invested in international businesses that are usually trying to grow their earnings globally, which I think is appealing.
