How to become a millionaire by investing in ASX shares

Investing $25,000 in Nearmap Ltd (ASX:NEA) shares 10 years ago would have made you a millionaire. Here's how you can do it now…

| 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

Becoming a millionaire is a dream that many Australians have.

Being the next winner of one of the lotteries run by Tabcorp Holdings Limited (ASX: TAH) is one way to achieve this, another is through investing in the share market.

Get lucky with a small cap.

One way of becoming rich quickly through the share market is getting lucky by investing in a small cap share that goes onto very big things.

For example, if you'd invested $25,000 into the shares of Nearmap Ltd (ASX: NEA) 10 years ago, that investment would now be worth a staggering ~$1.2 million.

But success stories like these are few and far between and can't be relied on. 

In light of this, I feel the best way to become a millionaire is to invest consistently, patiently, and smartly in the share market over a long period.

Long term investing.

As of the end of 2018, the Australian share market had provided an average return of 9.1% per annum over the last 30 years according to research by Fidelity.

If it were to provide the same return over the next 30 years, a single $10,000 investment each year earning the market return would grow to be worth over $1 million in 26 years.

Four years later that investment would be worth over $1.5 million and another five years later the magic of compound interest would take the value of your investment to almost $2.5 million if the returns stayed the same.

All in all, I feel this demonstrates how starting early and investing consistently in the market can generate significant wealth.

Where should you invest?

To get returns like that you could simply invest in an index tracking ETF, or you could look to speed things up by generating even better returns through individual shares.

Companies such as Appen Ltd (ASX: APX) and Cochlear Limited (ASX: COH) could be great long-term investments.

Appen is a leading provider of high-quality training data for the rapidly growing machine learning and artificial intelligences markets and Cochlear is a leading hearings solutions company which I believe is well-placed for long-term growth thanks to the quality of its products and ageing populations around the world.

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. and Nearmap Ltd. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended Cochlear Ltd. and Nearmap Ltd. 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 How to invest

Man pointing an upward line on a bar graph symbolising a rising share price.
How to invest

How to invest when the ASX hits a record high

Worried about buying at today's prices? Here's why you shouldn't be concerned.

Read more »

A man wearing glasses sits back in his desk chair with his hands behind his head staring smiling at his computer screens as the ASX share prices keep rising
How to invest

Lessons from a self-made ASX millionaire

Here's how he did it.

Read more »

A couple cheers as they sit on their lounge looking at their laptop and reading about the rising Redbubble share price
How to invest

$20,000 in savings? Here's how to target $1,000 of passive income each month

This could be the easiest way to build a meaningful passive income from the share market.

Read more »

Three happy office workers cheer as they read about good financial news on a laptop.
How to invest

The 3 rules new ASX share investors should always follow

These rules could help you generate wealth in the share market.

Read more »

Person holding Australian dollar notes, symbolising dividends.
How to invest

How to build a $1,500 monthly income stream with ASX dividend shares

It isn't as hard as you think to build a monthly income stream on the share market.

Read more »

A smiling woman sits in a cafe reading a story on her phone about Rio Tinto and drinking a coffee with a laptop open in front of her.
How to invest

How to start your ASX share portfolio with just $1,000

Investing doesn't need to be hard. Here's an easy way to start.

Read more »

Happy young woman saving money in a piggy bank.
How to invest

How I'd invest $250,000 in Australian dividend stocks to never worry about money again

Here are a number of stocks that could be top options for income investors with money to put into the…

Read more »

Warren Buffett
How to invest

5 easy steps to invest like Warren Buffett with ASX shares

It isn't as hard as you might think to invest like the Oracle of Omaha.

Read more »