Most ASX investors buy shares with the objective of getting rich.
When starting from scratch, becoming an ASX millionaire might seem like a difficult task.
Whether you're setting aside a portion of your monthly paycheque, diverting funds from your side hustle, or planning to invest your tax refund, building wealth can seem like a tedious task.
However, if you stick with your game plan, it is certainly worth the effort.
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The power of compounding
Investors who regularly invest in the stock market (and stay invested) benefit from compounding.
This means their wealth grows at an increasing rate. In other words, the longer they invest, the faster their wealth accelerates.
According to Vanguard, the Australian share market has increased at a compound annual growth rate (CAGR) of 9.1% over the past 30 years.
For example, an investor who makes an initial investment of $10,000 and invests $450 a month at this rate would become an ASX millionaire in less than 30 years. At year 30, their net worth would be $1,003,490. This would be based on $172,000 contributed and $832,490 on interest (or capital gains and dividends in the case of shares).
Wise words from Charlie Munger
Back in 1999, at Berkshire Hathaway's annual general meeting, then Chairman Charlie Munger acknowledged the difficulties in reaching the first $100,000. He also stressed the significance of reaching this milestone and the degree of sacrifice that may be required to get there:
I don't care what you have to do—if it means walking everywhere and not eating anything that wasn't purchased with a coupon, find a way to get your hands on $100,000. After that, you can ease off the gas a little bit.
When Charlie Munder passed away in 2023, his estimated wealth was US$2.6 billion. Safe to say, Munger knew a thing or two about getting rich.
Foolish Takeaway
Setting aside a portion of our monthly pay to make regular investments requires significant discipline. However, the rewards can be massive. With a starting portfolio of $10,000 and regular monthly contributions of $450 a month to your share portfolio, you can become an ASX millionaire in less than 30 years. When following this process, it pays to remember Charlie Munger's advice that the first $100,000 can be hardest but also the most important.
Of course, investing in market-beating ASX stocks can allow you to get rich quicker. For example, those who bought Pro Medicus Ltd (ASX: PME), Life360 Inc (ASX: 360), and Supply Network Ltd (ASX: SNL) 5 years ago are likely to reach millionaire status much sooner.
