The share market is very volatile right now, it hasn't been this volatile for a decade. I think the volatility and lower share prices could be an opportunity to accelerate your share portfolio to $1 million over the long-term.
Why does this help?
Share prices going lower doesn't sound as though it would help you get to $1 million faster, particularly if your portfolio is down at the moment. Unless you're retired I think it's a helpful thing for your portfolio's balance in the coming years.
The healthcare side of this whole situation is terrible, make sure you wash your hands more regularly!
Financially, the only thing that matters for your portfolio ultimately is the investment return your shares produce. A large part of your investment returns will be decided by the price that you purchase shares, which also includes the dividend re-investing you do and the price the dividends buy at. Lower share prices should mean better long-term capital growth and a higher starting dividend yield.
As a made-up example, the REA Group Limited (ASX: A2M) share price could finish at $350 in 2030. If you purchased at $114 a few weeks ago you'd make a 207% capital return, plus dividends. If you purchased at the start of this week at $92 you'd make a 280% capital return, plus dividends. Same share, same ending price, but a difference of 73%.
Here's a compound interest example for your portfolio
Vanguard has a great tool where you can see the returns from different assets over different time periods.
The compound returns your portfolio produces makes an enormous difference to the end result.
Imagine if you could invest $10,000 into Australian shares. Between 1 January 2009 and 31 January 2020 Australian shares returned an average of 10.8% per annum. In 10 years your $10,000 would turn into $27,887.
However, between 1 January 2007 and January 2020 Australian shares only returned 6.2%. At that rate, the $10,000 would only turn into $18,249 over 10 years.
The difference in just 10 years is enormous. Whilst this coronavirus period won't get you to $1 million immediately, it can help your portfolio compound much faster over the longer-term.
Of course, it would be impossible to invest everything that you'd ever invest into shares during this period. But I think it shows how important taking advantage of these times are. That's what I'm trying to do.
