The ASX share market has the potential to produce good returns over the long term. If an investor chooses right, the picks could help someone become a millionaire.
In the grand scheme of things, investing $300 a month may not seem like that much. But some brokers now offer very cheap brokerage, which makes investing with less than $1,000 more appealing.
How long will it take to become a millionaire?
That's the million-dollar question, isn't it?
It depends on the rate of return of the ASX share portfolio. But, compounding helps lessen how much people need to invest. Historically, the share market has returned an average of around 10% per annum.
Using the Moneysmart calculator, investing $300 per month would turn into over $1 million in less than 36 years if the portfolio returned 10% per annum. That means a 20-year-old could be a millionaire before they're 60.
With how much the share market has been hurt over 2022, this lower valuation starting point could mean slightly better returns. By choosing good investments, I think it could be reasonably possible to achieve returns of 12% per annum, but that's just a guess.
Investing $300 per month, returning 12% per year, could turn into $1 million after less than 32 years.
Obviously investing more per month over the decades and/or the investments generating a better return would mean that millionaire status came quicker.
But which ASX shares could make good long-term investments?
3 ASX shares for long-term investing
Brickworks Limited (ASX: BKW)
A building products business may not sound like the most exciting choice, and I'm not suggesting Brickworks because of its brickmaking abilities, though it's very good at it. It's the leader in Australia and the north east of the United States. It will soon be supplying bricks to the United Kingdom as well.
But it's the other sides of the business that I like. It owns a large chunk of Washington H Soul Pattinson and Co Ltd (ASX: SOL), a century-old investment business. This is steadily adding value and growing dividend cash flow for Brickworks.
Brickworks also owns half of a growing industrial property trust. This trust is building big (and advanced) warehouses on excess land that Brickworks no longer needs. It's unlocking the value of that land, making big development profits, and creating a strong stream of rental profit.
I think both the Soul Pattinson shares and property assets can drive value for the ASX share for many years to come.
VanEck Morningstar Wide Moat ETF (ASX: MOAT)
This is an exchange-traded fund (ETF) that aims to invest in US businesses with strong competitive advantages (which can be called an 'economic moat'). Morningstar analysts believe that the competitive advantages will endure for a minimum of a decade and likely for two decades.
Businesses are only added to the portfolio if they are at a good price compared to the Morningstar 'fair value' price.
In my opinion, it means this ETF is designed to essentially always have a portfolio of high-quality, attractively-priced investments. It currently has around 50 names in the portfolio.
Past performance is not a reliable indicator of future performance, but over the past five years to the end of November 2022, it had returned an average of 14.7% per annum.
BetaShares Nasdaq 100 ETF (ASX: NDQ)
This ASX share is also an ETF. It offers a way for investors to get more concentrated exposure to some of the world's leading businesses. These include Microsoft, Apple, Amazon, Alphabet, Nvidia, Costco, Cisco Systems, Adobe and so on. It has 100 positions in total.
The great thing about this portfolio is that it holds many of the world's leading companies from their respective industries. There are also names like Advanced Micro Devices, Intuitive Surgical, PayPal and Moderna in the portfolio as well.
I'm not sure which names will be there in 10 or 20 years, but I think that 100 of the largest businesses on the NASDAQ, as a group, can keep doing well in the long term. While the future may not be the same as the past, the BetaShares Nasdaq 100 ETF had returned an average of 13.3% over the three years to 30 November 2022.
