With news that the average Australian is now a millionaire you may be wondering how to get in on that wealth action.
I definitely believe anyone can create a $1 million portfolio by just investing $1,000 month into ASX shares.
The main thing you need on your side is compound interest. Imagine trying to save $1 million without compound interest of any sort. It would take around 20 years if you were saving $50,000 a year.
One of my favourite quotes (supposedly) came from one of the smartest people to ever live, Albert Einstein. He said “Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t… pays it.”
Compound interest is a very strong force, but it’s simple to understand. It’s just letting interest earn interest year after year. So what’s the best way to access that?
Certainly not bank accounts or term deposits these days. With the RBA cutting interest rates twice over the past couple of months, we’re left with Australian interest rates at 1%, so you’ll be lucky to find many savings options with interest rates above 2%. Bonds won’t help much either.
I believe the only two real options to consider are property and ownership of businesses, meaning shares. Taking on a lot of debt doesn’t strike me as attractive, particularly in this uncertain era for property prices.
Over the decades, share indexes like Vanguard Australian Share ETF (ASX: VAS) and iShares S&P 500 ETF (ASX: IVV) have returned an average of 10% a year, which doesn’t include the franking credits from Australian businesses.
If you invest $1,000 a month and it compounds at 10% a year it would take less than 24 years to reach a portfolio value of $1 million. Sounds great, right? A 20-year old could be a millionaire before the age of 45 if they can find the $1,000 a month.
Investing more than $1,000 a month would lead to a far greater portfolio size. Another way to get to $1 million would be if you could achieve returns of 12% a year, which would make the millionaire goal occur within 22 years.
How can you generate stronger returns? Well, if Dr Who would give me his time machine I’d go back and invest in shares like Altium Limited (ASX: ALU), a2 Milk Company Ltd (ASX: A2M), REA Group Limited (ASX: REA) and Pro Medicus Limited (ASX: PME).
Starting today, you have to find high-quality ASX shares that are undervalued and can beat the market, such as these top stocks.
If you like trustworthy, stable, high-performing companies that pay fat fully franked dividends – we’ve got you covered!
Stock #1 is a beloved old Australian company turning its attention to high-margin businesses… and rapidly returning cash to shareholders with its hefty dividend…
While Stock #2 is an online powerhouse that’s rapidly gaining market share all around the globe… poised for years (or even decades) of tremendous growth…
Even better, Stock #3 offers a whopping 6.5% grossed-up dividend! Which beats the rates on term deposits right out of the water – and offers the potential for capital gains, too.
You can discover all three shares inside our new report right now. To scoop up your FREE copy, simply click the link below right now. But you will want to hurry – this free report is available for a LIMITED TIME ONLY!
Tristan Harrison owns shares of Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of A2 Milk and Altium. The Motley Fool Australia has recommended Pro Medicus Ltd. and REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019