ASX stocks are one of the best ways to grow wealth significantly over the long-term. They're simple to own and can be big beneficiaries from the financial power of compounding.
I'd advocate for almost every Australian who can manage it to regularly invest in the (ASX) stock market because of how much that can make a difference after 20, 30 or 40 years.
Someone who is in their 30s may be approaching the best earnings phase of their life, so it's a good time to think about putting some money towards investing to help grow wealth faster.
If someone can regularly invest more money into their portfolio, they could reach $1 million or even more in the coming decades. Let's have a look at how much it could grow.
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Wealth potential of investing $1,500 monthly into ASX stocks
While investing $1,500 per month may be a stretch for some households, it may be achievable for others. Savings are built by spending less than we earn. So, creating savings comes down to spending less, earning more or a combination of both.
If a 30 year old wanted to start investing $1,500 per month, they may have 35 years or so before reaching retirement age. That's a long time for compounding to help growth.
Over the long-term, the (ASX) stock market has returned an average of 10% per year, so that's the rate of return I'll use for my calculations. Returns could be stronger or weaker than that over the long-term.
If someone invested $1,500 per month for 30 years and it returned an average of 10% per year, then that could turn into $2.96 million after three decades. That'd be an amazing result, in my opinion.
The 30-year-old may decide to continue investing until they're 70, giving an extra five years of compounding, which could make a big difference to the final result. Continuing to invest $1,500 per month and compounding at 10% per year could enable the nest egg to grow into $4.88 million.
But, someone else may decide they want to retire earlier than 65. Investing $1,500 per month and compounding for 25 years at 10% per year could become $1.77 million, which is still an excellent portfolio value.
What to invest in?
There are a number of compelling exchange-traded funds (ETFs) – some of which do invest in ASX stocks- that can provide investors with pleasing diversification and good returns.
Investors can invest in some of the best global businesses with certain ASX-listed ETFs such as Vanguard MSCI Index International Shares ETF (ASX: VGS), VanEck MSCI International Quality ETF (ASX: QUAL), Betashares Global Quality Leaders ETF (ASX: QLTY) and VanEck Morningstar Wide Moat ETF (ASX: MOAT).
I don't know what the future returns of the above ETFs will be, but I'm optimistic they will be positive for wealth-building over the long-term. I'd also happily add strong ASX growth shares to my portfolio to help boost overall returns alongside the ETFs.
