Want to be a millionaire with shares? It's easier than you think

Becoming a millionaire isn't that difficult with shares.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

I'm sure nearly everyone reading this article would like to grow their net worth by $1 million. If you're in your 20s you may think that becoming a millionaire is impossible.

Not so, I say!

MoneySmart has a lot of wonderful tools and calculators to help you work out money scenarios. One of my favourite calculators on the website is the compound interest calculator.

If you want to become a millionaire with cash you have to contribute most of the money yourself.

With shares, time and compounding can do an enormous amount of the work.

If you start with $1,000 and add $500 a month for 30 years whilst achieving the long-term market return of say 10%, you'll have just over $1 million.

Starting with $1,000 is not much at all.

Adding $500 a month throughout the entire period, not including any increase to contributions would hopefully be easy to do.

Generating a 10% return a year should be achievable with just a low-cost quality exchange-traded fund (ETF) like Vanguard US Total Market Shares Index ETF (ASX: VTS) or iShares S&P 500 ETF (ASX: IVV). Other globally-focused funds like MFF Capital Investments Ltd (ASX: MFF) and Magellan Global Trust (ASX: MGG) could also likely achieve that return.

If you increased that monthly addition to your portfolio to $1,000 a month then you'd have almost $2 million after 30 years.

If you manage to choose high-performing individual shares that deliver a return of more than 10% per annum then you could really supercharge your returns.

Foolish takeaway

All of these calculations are based on 30 years. A 25 year old could easily be a millionaire by 55. It's not too late for a 35 year old to start investing and be wealthy by the time they're 65. Sounds pretty easy, right?

Motley Fool contributor Tristan Harrison owns shares of Magellan Flagship Fund Ltd and MAGLOBTRST UNITS. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

More on Personal Finance

A man walks up three brick pillars to a dollar sign.
Personal Finance

How to replace your wage with passive income in 3 steps

It’s a straightforward process to replace a salary with dividends.

Read more »

Cubes with tax written on them on top of Australian dollar notes.
Tax

How much tax do your ASX shares pay? Why it might matter

Taxes. One of the two unavoidables in life.

Read more »

a small girl empties a piggy bank of coins onto a table while her mother looks on in the background.
Personal Finance

Relying on bank term deposits to build wealth? You need to read this

Looking to grow your net worth? Term deposits may not be the best choice.

Read more »

Elderly couple look sideways at each other in mild disagreement
Retirement

How would the proposed unrealised gains tax impact your superannuation?

If passed, the impacts could be profound for those with higher-end super balances.

Read more »

a mature but cool older woman holds a watering can and tends to a healthy green plant growing up the wall in her house.
Personal Finance

$50,000 in an offset? The hidden cost of not investing in ASX shares

Saving 7.5% using an offset is not the same as earning 7.5% on shares.

Read more »

A young woman with a ponytail stands at the crossroads, trying to choose between one way or the other.
Personal Finance

Dividends or capital gains from ASX shares: Which are better?

Should investors be more interested in one type of return over another?

Read more »

parents putting money in piggy bank for kids future
Retirement

Delayed retirement and other costs of being the Bank of Mum and Dad

A survey shows delayed retirement and lost opportunities to travel are among the costs.

Read more »

A guy wearing glasses tries to show off his muscles.
Personal Finance

5 ways ASX shares investors define financial success

What does financial success mean to you?

Read more »