My $5 a day ASX second income plan for 2024

Even small amounts can grow into something big in the share market.

| More on:
Man holding a calculator with Australian dollar notes, symbolising dividends.

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

When it comes to investing, you don't have to start with big lump sums to build your wealth.

Particularly now there are investment platforms out there that allow you to invest small amounts or even your spare change into the share market.

In fact, if you were to give up a coffee a day and put $5 into ASX shares, you could generate big returns and even a second income over the long term.

$5 a day into ASX shares

Over the long term, the Australian share market has generated an average return of approximately 10% per annum.

It has been possible to beat this return by investing in ASX shares with strong business models, positive long-term growth outlooks, and competitive advantages. Just look at Warren Buffett's track record at Berkshire Hathaway (NYSE: BRK.B) to see this.

But for the purpose of this article, we're going to assume that you match the market return rather than beat it.

With that in mind, let's see what you happen if you were to invest $5 a day into ASX shares.

Firstly, $5 a day equates to an investment of approximately $152 per month on average throughout the year.

If you put this amount into ASX shares for 10 years and earned an average 10% per annum return, you would have grown your portfolio to just over $30,000.

And thanks to compounding, if you were to keep going, you would grow your investment portfolio to $110,000 after a total of 20 years and over $315,000 at the 30-year mark.

Making a second income

Once you've built up your investment portfolio, you can start thinking about a second income.

For example, if you were able to average a 6% dividend yield across your portfolio, your annual income would be as follows based on the above amounts:

  • $30,000 – $1,800 of income
  • $110,000 – $6,600 of income
  • $315,000 – $18,900 of income

All in all, I believe this demonstrates that by coming up with a long-term investment plan, even with small contributions, it can lead to significant wealth in the future.

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 positions in and has recommended Berkshire Hathaway. The Motley Fool Australia has recommended Berkshire Hathaway. 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 smiling woman sits in a cafe reading a story on her phone about Rio Tinto and drinking a coffee with a laptop open in front of her.
How to invest

How to start your ASX share portfolio with just $1,000

Investing doesn't need to be hard. Here's an easy way to start.

Read more »

Happy young woman saving money in a piggy bank.
How to invest

How I'd invest $250,000 in Australian dividend stocks to never worry about money again

Here are a number of stocks that could be top options for income investors with money to put into the…

Read more »

Warren Buffett
How to invest

5 easy steps to invest like Warren Buffett with ASX shares

It isn't as hard as you might think to invest like the Oracle of Omaha.

Read more »

A man leaps from a stack of gold coins to the next, each one higher than the last.
How to invest

Charlie Munger's 3 brutal steps to building wealth

Munger's advice still hits home.

Read more »

Person holding Australian dollar notes, symbolising dividends.
How to invest

Buy 3,401 BHP shares for $5,000 of passive income

Want a big income boost? Here's how to do it with this mining giant's shares.

Read more »

A young man sits at his desk with a laptop and documents with a gas heater visible behind him as though he is considering the information in front of him. about the BHP share price
How to invest

Beginner investors: Start with these 2 ASX Vanguard ETFs

No investor can go wrong with these simple ETFs...

Read more »

Hand of a woman carrying a bag of money, representing the concept of saving money or earning dividends.
How to invest

The $1,000-a-month ASX share investing plan for beginners

This is an easy way to grow your wealth over the long term.

Read more »

Warren Buffett
How to invest

The easy way to invest like Warren Buffett with ASX shares

It isn't as hard as you think to invest like the Oracle of Omaha.

Read more »