Turning a small investment in ASX shares into a $500k portfolio

You don't have to start investing with a big lump sum to grow your wealth.

A smiling woman with a handful of $100 notes, indicating strong dividend payments

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

Turning a small investment into a substantial portfolio might sound like a financial fairy tale, but in the world of ASX shares, this dream can become a reality.

The magic ingredients? Consistency, patience, a buy and hold attitude, and compounding.

Investing $500 a month

Although a $500 investment might seem insignificant, it's the consistent application of this amount that works wonders over time. Regular monthly investments into ASX shares allow you to capitalise on the power of compounding and dollar-cost averaging. The latter is a strategy where you invest a fixed amount at regular intervals, regardless of market fluctuations. This approach not only reduces the impact of market volatility but also encourages a disciplined investment habit.

Diversification

Diversification is the backbone of a strong investment portfolio. Allocating your $500 monthly investment across a diversified group of quality ASX shares helps mitigate risks and capture opportunities across various sectors. Thankfully, the Australian share market offers exposure to a range of sectors including finance, technology, retail, healthcare, and resources. They can all play a role in your diversified portfolio, allowing you to tap into the broader growth potential of the Australian economy. Investors could also leverage exchange-traded funds (ETFs) to gain access to other markets.

The buy and hold mindset

One of the most critical components of turning a small investment in ASX shares into a substantial portfolio is embracing the buy and hold approach. Warren Buffett famously said, "The stock market is a device for transferring money from the impatient to the patient." By resisting the urge to frequently trade based on short-term market fluctuations, you give your investments the time they need to weather market cycles and realise their full potential. In addition, the longer you invest, the more you can benefit from the power of compounding.

Reaching your $500k goal

With an average total return of 9.6% per annum since 1993, history shows that investing $500 into ASX shares each month could have turned into $500,000 in a little over 23 years. That means a 30-year-old could have built up a sizeable nest egg not long after turning 50 if they had followed this strategy. And while it is impossible to say what the market will do over the next 30 years, these returns are in line with the historical average. I feel this makes it a realistic goal for investors to target in the future.

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 no position in any of the stocks mentioned. 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 no position in any of the stocks mentioned. 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 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 »

A man sits cross-legged in a zen pose on top of his desk as papers fly around his head, keeping calm amid the volatility.
How to invest

Why market volatility is an ASX stock picker's best friend

Here's why you shouldn't fear market volatility.

Read more »

A businessman compares the growth trajectory of property versus shares.
How to invest

Why does Warren Buffett prefer shares over property?

Equities made Buffett the world's most successful investor.

Read more »