Exchange-traded funds (ETFs) have exploded in popularity among Australian investors over the past decade.
They are cheap, simple, and provide instant diversification across dozens or even hundreds of companies. Whether you want exposure to the Australian share market, Wall Street, or fast-growing tech themes like AI and cybersecurity, there's an ETF to suit.
But what many investors underestimate is just how powerful compounding can be when you stick with ETFs over the long run. The real magic doesn't come from short-term gains — it comes from letting time do the heavy lifting.
Image source: Getty Images
Why ASX ETFs are a good investment
Unlike stock picking, where a bad call can wipe out returns, ETFs like the Betashares Nasdaq 100 ETF (ASX: NDQ) or the Vanguard Msci Index International Shares ETF (ASX: VGS) spread risk across a wide basket of shares.
This makes it easier for investors to stay invested through market cycles — the most important factor in compounding success.
So, what happens if you put your money to work today? Let's start with a single $10,000 investment.
If that amount compounded at 10% per annum for 10 years (achievable but not guaranteed), it would grow to just under $26,000.
That is more than double your initial investment without adding another cent, simply by leaving your money in the market and letting compounding do its job.
Adding to your investment
Where things really get exciting is when you combine an upfront investment with consistent contributions. Let's say you invested $10,000 today and then added $500 a month for the next decade.
At the same 10% annual return, your portfolio would grow to around $125,000 after 10 years.
And if you were to keep this going for longer, let's say a total of 20 years, you would see your portfolio grow to approximately $430,000 if you generated an average 10% per annum return.
What this shows
The lesson is clear: starting early and staying consistent pays off.
ETFs make this process easier by offering instant diversification, low fees, and exposure to long-term growth themes.
You don't need to pick the next Pro Medicus Ltd (ASX: PME) or DroneShield Ltd (ASX: DRO) to build wealth. Simply committing to regular ETF investing can deliver results that might surprise you over time.
Foolish takeaway
So, what could $10,000 invested in ETFs today look like in 10 years? Left alone, it could double into $26,000. Add in $500 a month, and it might grow into more than $100,000.
The numbers are powerful, but the strategy is simple. Invest steadily and let compounding do the rest.
