A common stereotype of the share market and its investors is that it's some kind of millionaire's playground – suitable for those who have millions of dollars and want to make millions (even billions) more.
Whilst some investor's certainly fit that bill, it's not a defining trait of share markets as a whole. In fact, I would say more people use it properly (my subjective term) – that is, to build wealth slowly by investing what you can, when you can.
But if you follow this path, is it even possible to become a millionaire? Well, the answer is yes… depending on how much time you have to invest (and how much money, of course).
If you're an ace stock picker banging out returns of 40% or 50% per annum, it won't be too tricky. With that kind of performance, you'll only need 10 years to turn $10,000 into a million. But this is completely unrealistic for most investors (and if you can manage this kind of returns, you shouldn't be listening to this writer anyway).
Let's instead just take a market tracking index fund like the SPDR S&P/ASX 200 Fund (ASX: STW). Index funds like STW simply track the performance of the top 200 Australian companies – you can say it's just a bet on the 'market' as a whole. No stock picking required on your part.
STW has returned an average of 8.27% per annum since its inception in 2001 (including growth and dividends). That includes the GFC and all the other bumps we've had along the way. If you were to invest $10,000 in 2001 and just left it alone, it would have grown to around $44,000 today. A tidy sum to be sure, but not exactly enough to mint you a millionaire.
However, if you started with the same amount, and instead managed to top it up with a further investment of $1,000 a month – it would take around 25 years to get to the million-dollar mark. That's a big ask for most of us, but also an achievable one in my view. Especially if you enlist the services of your significant other to help.
Foolish Takeaway
So yes, ASX shares can indeed make you a millionaire. It will just take time, patience and dedication. Of course, you can always improve your investing skills and achieve market-beating returns – which will help the process immensely.
