Having a $1 million ASX share portfolio is not a common thing for most Aussie households. But, it'd be very nice to reach that status.
The method I'm about to explain doesn't involve taking on lots of debt and creating a negatively geared property empire. Instead, it's about investing in ASX shares and utilising the power of compound interest.
I'm going to show how it's possible to create a $1 million share portfolio in just a few steps.
Earn
It takes money to earn money, so we have to ensure money is flowing in through the door.
For starters, we need to pay for the essentials and any other costs of life, such as a roof over our heads, food, energy and so on. For younger Aussies, it may be necessary that a second source of income is required to earn the amount of money needed to invest.
Australia may be one of the best countries to live in, though it's also an expensive place to be. It'd be easier to inherit a huge sum or win the lottery, but otherwise, the only way to allocate money to ASX shares is to earn the money ourselves.
Spend less than you earn
Every Aussie household budget looks different, so only each individual can know their numbers. Having kids, pets, living in different locations and so on can really change the financial picture.
With money coming in, the next step is to ensure that not every dollar is being spent, if possible. There are plenty of examples of famous individuals who have reportedly gone into bankruptcy despite having significant earnings/assets such as Mike Tyson, Willie Nelson, Alan Bond, MC Hammer, Boris Becker and Burt Reynolds. My point being, some people don't have an earning problem but a spending problem.
If people want to find savings for ASX share investing, they can earn more, spend less or a combination of both. Whatever it takes to unlock some savings. Investors can start investing with as little as $500, though close to $1,000 may make more sense to ensure lower brokerage costs.
Invest in ASX shares
The third step is just to get stuck into it and start. The first investment you make doesn't need to be the best one you ever do.
I believe the simplest way to start investing is with exchange-traded funds (ETFs) because of how we can buy a (large) group of shares with just a single investment, providing pleasing diversification.
The ETFs that provide exposure to businesses that generate earnings from across the world, which reduces the risk of being too focused on Australia. Two of my favourite ASX ETFs are Vanguard MSCI Index International Shares ETF (ASX: VGS) and VanEck MSCI International Quality ETF (ASX: QUAL) for long-term investing.
Investors can also choose individual ASX shares with compelling long-term futures that could beat the market. I'm thinking of names like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Brickworks Ltd (ASX: BKW) and Pinnacle Investment Management Group Ltd (ASX: PNI).
Be patient
The final step in this plan of becoming a millionaire with ASX shares may be the hardest for some people – be patient. Reaching millionaire status doesn't happen overnight, it's based on years of hard work and discipline.
Sometimes market declines will happen, like we saw during COVID-19, the high inflation period of 2022 and 2023, and the US tariff volatility. Those sell-offs are the best time to buy, in my view.
If someone invested $1,000 per month and the portfolio returned an average of 10% per year (which the global share market has generally achieved over the long-term), that would turn into $1 million in less than 24 years. Investing more per month could accelerate that wealth growth – investing $2,000 per month could take less than 18 years to become worth more than $1 million.
Another way to accelerate wealth creation is to achieve stronger returns, which is what I'm trying to do by investing in faster-growing businesses.
