How I would invest in ASX shares to retire rich

I think the share market is the place to be if you want to retire rich.

| More on:
A couple are happy sitting on their yacht.

Image source: Getty Images

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

Key points

  • The share market is a great place to grow your wealth
  • Investing in dividend-paying ASX shares could lead to a winning combination of capital gains and income
  • Investors can also switch their focus to income once they have grown their portfolio to boost their income further

If you're aiming to retire rich, then the Australian share market could be the place to do it.

But how would you go about achieving this goal? One way could be to search for dividend-paying ASX shares to buy and hold for the long term.

That's because if you can find ASX shares that have the potential to increase their dividends each year, by the time it comes to retirement, you could be getting some very big dividend payments.

Growing dividends

A good example of this is Treasury Wine Estates Ltd (ASX: TWE). Over the last 12 months, the wine giant has paid out fully franked dividends totalling 34 cents per share. While this only offers a 2.5% dividend yield if you buy its shares today, it is a very different situation for longer-term shareholders.

If you had bought Treasury Wine shares a little over a decade ago when they were trading at $3.11, you would be receiving a yield on cost of 10.9%.

This means that a $50,000 investment back then would be providing you with an income of approximately $5,500 now. Whereas if you invested $50,000 at today's price you would only receive $1,250 in dividends.

And let's not forget the capital gains! Despite some tough times in recent years, the wine giant's shares have generated strong returns for investors over the last decade. This means that your $50,000 investment would have grown to become almost $220,000 today.

So, not only are you getting a very welcome paycheck each year, but you're also sitting on a sizeable portfolio.

Switch to income?

The latter provides investors with a couple of options. One is that they can keep doing what they're doing and let compounding work its magic. The other is switching your portfolio to a focus on income.

For example, according to a note out of Goldman Sachs, its analysts expect a $1.47 per share dividend from Westpac Banking Corp (ASX: WBC) this year. This equates to a 6.65% fully franked dividend yield at current prices.

If investors were to put that $220,000 into this big four bank's shares, they would boost their income to almost $15,000. And with Goldman then expecting Westpac to increase its dividend to $1.56 per share in FY 2024, another paycheck worth $15,500 potentially awaits a year later.

That's $30,000 in dividends from an original $50,000 investment in under 15 years.

And while past performance is no guarantee of future returns, Treasury Wine's returns are largely in line with historical market averages. So, it certainly is achievable for investors if they can identify the right ASX shares to buy.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor James Mickleboro has positions in Westpac Banking. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Treasury Wine Estates and Westpac Banking. 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

A group of young ASX investors sitting around a laptop with an older lady standing behind them explaining how investing works.
How to invest

Why it's a stock picker's market and how to maximise your returns

It pays to be selective in 2025.

Read more »

Person handing out $100 notes, symbolising ex-dividend date.
How to invest

How $500 a month in ASX shares could make you wealthy

Investing consistently could be the key to becoming rich in the future. Here's how.

Read more »

A woman in hammock with headphones on enjoying life which symbolises passive income.
How to invest

A new age: What safe-haven investments look like in 2025

Looking beyond the traditional definition.

Read more »

Smiling woman with her head and arm on a desk holding $100 notes out, symbolising dividends.
How to invest

How to earn $1,000 a month in passive income from ASX shares

Want a wage from the share market? Here's how to do it.

Read more »

Male hands holding Australian dollar banknotes, symbolising dividends.
How to invest

How to build a $250,000 ASX share portfolio by 2035

Here's how you could potentially reach $250k from zero in just a decade.

Read more »

A businesswoman weighs up the stack of cash she receives, with the pile in one hand significantly more than the other hand.
How to invest

How I'd build a $20,000 annual passive income stream from these top ASX 200 shares

To earn $20,000 a year in passive income, I’d start with these three ASX 200 shares.

Read more »

a smiling picture of legendary US investment guru Warren Buffett.
How to invest

Life after Warren Buffett: other successful investors still in the game worth following

With Warren Buffett retiring it’s time to look at some other investors delivering solid returns.  

Read more »

An older woman gazes over the top of her glasses with a quizzical expression as if she is considering some information.
How to invest

How to build an ASX ETF portfolio to match your risk profile

Time for a portfolio review?

Read more »