The power of compounding: What $1,000 a month in ASX shares could become

Compounding is your best friend in the world of investing.

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Man drawing an upward line on a bar graph symbolising a rising share price.

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In the world of investing, there's one concept that quietly does the heavy lifting — compounding.

This is what happens when you generate returns on top of returns, snowballing into serious wealth over time.

With that in mind, let's see what could happen if you invest $1,000 a month into ASX shares with the aim of building long-term wealth.

A simple formula for serious wealth with ASX shares

Let's assume you are investing in a mix of high quality ASX shares — companies like industrial property juggernaut Goodman Group (ASX: GMG) and sleep treatment specialist ResMed Inc (ASX: RMD), or perhaps even an exchange traded fund (ETF) tracking the broader index such as Vanguard Australian Shares Index ETF (ASX: VAS). These are the kinds of businesses that have delivered strong long term growth and are well-positioned to continue compounding for investors over time.

If you invested $1,000 every month — the equivalent of $12,000 a year — and achieved an average annual total return of 10%, which is in line with historical averages (but not guaranteed), here is what your portfolio could grow into over time:

  • After 10 years: ~$200,000
  • After 20 years: ~$725,000  
  • After 30 years: Over $2 million

That is the power of consistency and compounding — monthly investments that grow into something life-changing for investors, without the need to chase a quick buck on speculative stocks or trying to time the market.

No shortcuts, just time and discipline

The beauty of this investment approach is that it is simple, repeatable, and low-stress. You don't need to pick the next big thing or worry about the day to day noise of the share market.

Instead, you back strong, established businesses that have a history of compounding earnings, reinvesting in their own growth, and delivering value to their shareholders.

Think companies like cloud accounting platform provider Xero Ltd (ASX: XRO), conglomerate Wesfarmers Ltd (ASX: ALL), or gaming technology company Aristocrat Leisure Ltd (ASX: ALL). These are businesses with sustainable competitive advantages and the ability to grow steadily over the long haul.

Foolish takeaway

In investing, there are no guaranteed returns — but history has shown that ASX shares have delivered, on average, around 10% per annum over the long term.

That kind of return, combined with a simple monthly habit, can unlock a level of wealth many people never thought possible. The key is coming up with your investment plan and then sticking with it through the years. Your future self will certainly thank you for doing so.

Motley Fool contributor James Mickleboro has positions in Goodman Group, ResMed, and Xero. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goodman Group, ResMed, and Xero. The Motley Fool Australia has positions in and has recommended ResMed and Xero. The Motley Fool Australia has recommended Goodman Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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