In the world of investing, there's one concept that quietly does the heavy lifting — compounding.
This is what happens when you generate returns on top of returns, snowballing into serious wealth over time.
With that in mind, let's see what could happen if you invest $1,000 a month into ASX shares with the aim of building long-term wealth.
A simple formula for serious wealth with ASX shares
Let's assume you are investing in a mix of high quality ASX shares — companies like industrial property juggernaut Goodman Group (ASX: GMG) and sleep treatment specialist ResMed Inc (ASX: RMD), or perhaps even an exchange traded fund (ETF) tracking the broader index such as Vanguard Australian Shares Index ETF (ASX: VAS). These are the kinds of businesses that have delivered strong long term growth and are well-positioned to continue compounding for investors over time.
If you invested $1,000 every month — the equivalent of $12,000 a year — and achieved an average annual total return of 10%, which is in line with historical averages (but not guaranteed), here is what your portfolio could grow into over time:
- After 10 years: ~$200,000
- After 20 years: ~$725,000
- After 30 years: Over $2 million
That is the power of consistency and compounding — monthly investments that grow into something life-changing for investors, without the need to chase a quick buck on speculative stocks or trying to time the market.
No shortcuts, just time and discipline
The beauty of this investment approach is that it is simple, repeatable, and low-stress. You don't need to pick the next big thing or worry about the day to day noise of the share market.
Instead, you back strong, established businesses that have a history of compounding earnings, reinvesting in their own growth, and delivering value to their shareholders.
Think companies like cloud accounting platform provider Xero Ltd (ASX: XRO), conglomerate Wesfarmers Ltd (ASX: ALL), or gaming technology company Aristocrat Leisure Ltd (ASX: ALL). These are businesses with sustainable competitive advantages and the ability to grow steadily over the long haul.
Foolish takeaway
In investing, there are no guaranteed returns — but history has shown that ASX shares have delivered, on average, around 10% per annum over the long term.
That kind of return, combined with a simple monthly habit, can unlock a level of wealth many people never thought possible. The key is coming up with your investment plan and then sticking with it through the years. Your future self will certainly thank you for doing so.
