Investing $500 a month may not feel like a life-changing strategy at first.
The real difference appears when those purchases continue for years, and the returns start earning returns of their own.
So, what could that monthly habit eventually become?
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Building towards a 9% return
For this example, I will assume the portfolio earns an average return of 9% per annum, with dividends reinvested.
That figure is not guaranteed. Share market returns can vary significantly from year to year, and investors will experience falls along the way.
Still, I think 9% is a reasonable long-term target for a portfolio built around diversified exchange-traded funds (ETFs) and quality ASX shares.
I would consider making a broad fund such as the iShares S&P 500 ETF (ASX: IVV) a core holding. It gives investors access to hundreds of major US companies across technology, healthcare, financial services, consumer goods, and industrials.
The Vanguard Diversified High Growth Index ETF (ASX: VDHG) could provide an even broader foundation by spreading money across Australian shares, international markets, emerging economies, and a smaller allocation to defensive assets.
Investors comfortable with greater volatility could add the Betashares Nasdaq 100 ETF (ASX: NDQ), which places more weight on companies benefiting from artificial intelligence, cloud computing, semiconductors, software, and digital commerce.
Which ASX shares could help?
I would also consider selected ASX shares capable of growing earnings over many years.
Breville Group Ltd (ASX: BRG) has room to expand its premium appliance brands across international markets, while Goodman Group (ASX: GMG) is building data centre infrastructure in locations where land and power are difficult to secure.
Nextdc Ltd (ASX: NXT) offers another route into rising demand for computing capacity. Its facilities support cloud services, artificial intelligence, cybersecurity, and the increasing volume of data moving through the economy.
Cochlear Ltd (ASX: COH) could add healthcare exposure through a business serving people with hearing loss, while BHP Group Ltd (ASX: BHP) provides access to iron ore, copper, potash, dividends, and the resources required for global development.
I would not expect every holding to return exactly 9%. The aim would be for the portfolio as a whole to reach that average over time.
What could the portfolio become?
With $500 invested at the end of every month and an average annual return of 9%, the portfolio could grow to approximately $95,000 after 10 years.
After 20 years, it could reach around $320,000.
The effect of compounding becomes much clearer from there. After 30 years, the balance could rise to approximately $860,000.
Continuing for 40 years could produce around $2.1 million, while 50 years could take the portfolio to roughly $5.1 million!
These estimates assume monthly compounding and exclude brokerage, fees, and tax.
The later figures look so much larger because the portfolio eventually contributes far more growth than the monthly deposits. Time allows each earlier investment to keep compounding while new money continues entering the market.
Foolish takeaway
Investing $500 a month in ASX shares could create a substantial portfolio, but the biggest results require patience.
I would build around diversified ETFs, add quality companies with clear growth opportunities, reinvest the income, and continue buying through both strong and weak markets.
The first decade may feel gradual. But over longer periods, compounding can completely change the outcome.
At an average return of 9%, a regular $500 investment could eventually grow into several million dollars.
