The potential of assets to grow our wealth over the long term becomes increasingly powerful as the numbers compound. Putting money towards ASX shares each day, week, or month could make a huge difference to how much wealth we have in the coming years.
How much do we need to invest to become wealthy? Depends on how wealthy you want to be and how long you have to achieve that goal.
It'd be great to invest $100,000 every year, but not many households have a financial picture like that.
For Aussies serious about building wealth, reaching $1 million will require significant effort, choices, and patience. It'll require attention on the expenses and/or income side of things.
I'm going to show how putting $50 per day into an ASX share portfolio can deliver results. But investing more or less than that would also be a worthwhile thing to do, depending on a household's finances.
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Investing $50 per day into ASX shares
I'm not suggesting that Aussies make an investment every single day. Doing so once a month or so would probably be a good call. If someone saved $50 per day for 30 days, that would be $1,500. I'd suggest around $1,000 would be a bare minimum because that could help minimise brokerage costs.
Over a year, saving $50 per day would translate into investing $18,250. Again, I'll point out that investing $5,000, $10,000, or $25,000 over a year would also be a great thing to do for our finances. But I'll show how $50 per day can develop.
I'd need a working crystal ball to know how good the returns are going to be in the coming years.
Past performance is not a guarantee, or even a reliable indicator, of future returns. But it shows the types of returns an investment can produce.
The ASX share market – which I think the Vanguard Australian Shares Index ETF (ASX: VAS) is a good proxy for – has returned an average of 10% per year over the ultra-long-term. If someone invested $50 per day and earned an average of 10% per year, it would grow to $1 million after 20 years.
The global share market could be a better place to invest for long-term returns because of the earnings growth potential and the strength of the businesses involved. I like the Vanguard MSCI Index International Shares ETF (ASX: VGS) as a way to invest in the global share market – it has returned an average of 13.4% per year over the past decade. Investing $50 per day would grow to $1 million in 17 years at that pace.
I think there are plenty of investments that could outperform these two over time, which is what I look for.
