I'd invest $580 a month in ASX 200 shares to aim for a million!

Seven figures is well within reach of ordinary Australians, if they have the patience, discipline and the right stocks.

| More on:
Woman smiling with her hands behind her back on her couch, symbolising passive income.

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

One million.

It's just a number, but there's something magic about seven figures that fascinates people.

If you'd like to one day have a million dollars in the bank, I'm here to tell you it's possible with S&P/ASX 200 Index (ASX: XJO) shares.

You don't have to be outrageously wealthy to start with. You just need discipline and a standard day job to make it happen.

Let me take you through one possible scenario:

Invest your savings now into the ASX 200

Comparison site Finder last year found the average Australian has $40,000 saved up.

So let's say you build yourself a stock portfolio with that.

Of course, at The Motley Fool we always urge investors to diversify their holdings to spread out the risk.

But other than that, go for the style that you find comfortable. Growth or dividend shares, it doesn't matter.

Either way, over the long term, I reckon you could aim to secure a 12% compound annual growth rate (CAGR).

Does that sound like a dream?

Check this out.

Over the past five years, quality ASX 200 names like Lovisa Holdings Ltd (ASX: LOV) and Altium Ltd (ASX: ALU) have managed to nab CAGRs of 25.3% and 19.4% respectively.

It's not like these are risky startups. They are established businesses among the top 200 largest public companies in the country.

Of course, I'm not saying every stock in your portfolio will do as well as Lovisa and Altium.

But with proper diversification, there might be a few of those winners mixed in with others that don't as well — and the whole lot could realistically perform at 12% growth each year.

Can you save regularly?

Now, what about that discipline I mentioned before?

That's needed to save regularly and keep adding to the portfolio.

A $40,000 parcel of shares growing at 12% each year with a further $580 invested each month could take you to seven figures in pretty reasonable time.

If the returns are compounded monthly, after 20 years that portfolio would be worth $1,009,470.

There's your million!

So if you start this at age 25, you could be retiring as a millionaire by the time you're just 45.

Even if you begin your stock investing journey at 40, you'd end up with a mill way before the legislated retirement age.

Best wishes for your investments.

Motley Fool contributor Tony Yoo has positions in Lovisa. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Altium and Lovisa. The Motley Fool Australia has recommended Lovisa. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Investing Strategies

A couple stares at the tv in shock, one holding the remote up ready to press.
Growth Shares

3 high-conviction ASX 200 stocks to buy and hold

Brokers think these shares are among the best to buy now.

Read more »

Australian dollar notes in the pocket of a man's jeans, symbolising dividends.
Dividend Investing

Big dividends: A 7% ASX ETF to buy for income this week

This ETF is a great choice when you can't find anything else...

Read more »

A woman sits at a table with notebook on lap and pen in hand as she gazes off to the side with the pen resting on the side of her face as though she is thinking and contemplating while a glass of orange juice and a pair of red sunglasses rests on the table beside her.
Dividend Investing

The smartest ASX dividend shares to buy with $3,000 right now

These businesses offer a pleasing dividend yield and great value.

Read more »

Happy woman working on a laptop.
Dividend Investing

The smartest ASX dividend stocks to buy with $1,000 right now

High yields are hard to find these days.

Read more »

Person holding Australian dollar notes, symbolising dividends.
Growth Shares

The smartest ASX growth stocks to buy with $3,000 right now

Analysts think these shares would be top picks for smart investors.

Read more »

A laughing woman wearing a bright yellow suit, black glasses and a black hat spins dollar bills out of her hands signifying the big dividends paid by BHP
Growth Shares

2 Australian stocks that could turn $10,000 into $100,000

Let's see why these shares could be destined for bright long-term futures.

Read more »

Different Australian notes.
ETFs

Own the Vanguard US Total Market Shares Index ETF? Here's your next dividend

Vanguard announced the final distribution amount for VTS ETF investors today.

Read more »

ETF written on cubes sitting on piles of coins.
ETFs

Own SPDR ASX ETFs? Here is your next dividend and when you'll receive it

State Street Global Advisors announced distribution payment amounts and dates today.

Read more »