Reaching a $1 million ASX share portfolio may be exactly what many Australians would like to create.
Of course, a million dollars doesn't just appear out of nowhere. If we want to build it ourselves, then it will take investing money, compounding, and some time.
Compounding is a very powerful financial force that can help us grow our wealth. A small number can grow significantly over time.
It could take an extremely long time to save $1 million of cash in the bank. But, we don't need to contribute as much if investments are organically growing themselves.
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How to make $1 million with ASX shares
If an Aussie can save $1,000 per month from their monthly budget, then they can put that into ASX shares. I acknowledge some households may find it harder than others to reach that $1,000.
Investing $1,000 per month translates into $12,000 per year. That's a solid amount going into ASX shares each month and each year, which is a great starting point towards building significant wealth.
It'll obviously take more than a year or two to reach $1 million, but I think it's definitely possible if Aussies are consistent with adding to the portfolio.
The question is – how long would it take?
Over the ultra-long-term, the average return of the share market has been an average of around 10%.
If someone invests $1,000 every month and it returned 10% per annum, then it'd take just under 24 years to reach a $1 million ASX share portfolio. Not bad at all. I'd utilise a diversified investment like Vanguard MSCI Index International Shares ETF (ASX: VGS) for this strategy.
What could make it quicker?
An obvious way to accelerate wealth building is simply by investing more, but that may not be possible or desired for investors.
Instead, it could be a great idea to look at investments that could deliver stronger long-term returns over time.
One way would be to invest in exchange-traded funds (ETFs) focused on high-quality businesses such as VanEck MSCI International Quality ETF (ASX: QUAL), Betashares Global Quality Leaders ETF (ASX: QLTY), and VanEck Morningstar Wide Moat ETF (ASX: MOAT).
If the portfolio were to grow by an average of 12.5% per annum, then it would become a $1 million ASX share portfolio in less than 21 years.
The best investments of all could be specific ASX shares with strong potential to become much more profitable businesses than they are today. That's what the Motley Fool is all about – finding great businesses that have a good chance of performing strongly.
