Do you want to turn $50,000 into $1 million?
It sounds difficult, but long-term investing in ASX shares can help you achieve such dreams.
Let's take a look at how you could go from a thousand-naire to a millionaire:
Compounding magic
The supreme power of compounding can be used to substantially grow the $50,000 pot.
One way of doing this is to construct a portfolio of ASX growth shares such as Goodman Group (ASX: GMG), RPMGlobal Holdings Ltd (ASX: RUL) and AVITA Medical Inc (ASX: AVH).
That basket is a great example of diversification, as they play in distinct fields — real estate, mining services and biotechnology.
Past performance is no indicator of what might happen in the future. But we need some numbers for our hypothetical investment, so let's break down how these stocks have performed.
Over the past five years, the Goodman share price has rocketed 116%. Not to be outdone, RPMGlobal shares have soared 128%, while Avita is getting a nosebleed after a 156% ascent.
Let's take the median of those as the general growth rate of your portfolio.
That means that the $50,000 nest egg will have a compound annual growth rate (CAGR) of 17.9%.
At that rate, sometime in the 19th year of the ASX shares portfolio we'll reach the magical million-dollar mark.
How to bring the million even faster
Not bad. But is 19 years too long to wait?
If so, the impatient can fatten up the portfolio along the way.
Presumably you came up with the $50,000 in the first place because you were able to save regularly.
So maintaining that saving habit can turn you into a millionaire just that bit faster.
Let's say you can scrounge up $500 each month.
Every month you use this saving to buy more ASX shares, while still ensuring the portfolio is well balanced for diversification.
That will lead to the million in the 16th year of investment.
Well done. Now you can use that lump sum to do whatever pleases you.
Perhaps you'll pour it into your superannuation. Maybe pay off the mortgage.
Or even reinvest it to generate a lifetime of passive income.
Whatever it is, it will grant you freedom.
The million bucks won't buy you happiness directly, but it will give you a fighting chance of achieving it by taking money troubles off the table of worries.
Good luck out there.