With the news that the average Australian is now a millionaire, you must be wondering how to get into that wealth action.
I firmly believe that anyone can create a $ 1 million portfolio by investing only $ 1,000 in ASX shares.
The main thing you need on your side is compound interest. Imagine trying to save $ 1 million without compound interest of any kind. It would take about 20 years if you saved $ 50,000 a year.
One of my favorite quotes (presumably) comes from one of the smartest people I've ever lived, Albert Einstein. He said "The compound interest is the eighth wonder of the world. Who understands it, earns it … who does not pay it … pays him".
The compound interest is a very strong force, but it is simple to understand. It's just letting interest earn interest year after year. So what's the best way to access it?
Certainly not bank accounts or term deposits these days. With the reduction of RBA interest rates twice in the last two months, we are left with Australian interest rates at 1%, so you will be lucky to find many savings options with interest rates above 2%. Even bonds will not be of great help.
I believe that the only two options to consider are ownership and ownership of companies, or shares. The assumption of many debts does not seem interesting to me, especially in this uncertain age of real estate prices.
Over the decades, share indexes like ETF Vanguard Australian Share (ASX: VAS) e IShares S & P 500 ETF (ASX: IVV) returned an average of 10% a year, which does not include Australian companies' postage credits.
If you invest $ 1,000 a month and this worsens to 10% a year, it would take less than 24 years to reach a portfolio value of $ 1 million. Sounds great, right? A twenty year old could be a millionaire before the age of 45 if they can find the $ 1,000 a month.
Investing more than $ 1,000 a month would lead to much larger portfolio sizes. Another way to get $ 1 million would be if you could get 12% returns per year, which would make the millionaire goal within 22 years.
How can you generate stronger returns? Well, if Dr Who gave me his time machine, I'd go back and invest in stocks like Altium Limited (ASX: ALU), a2 Milk Company Ltd (ASX: A2M), REA Group Limited (ASX: REA) e Pro Medicus Limited (ASX: PME).
Starting today, you need to find high-quality ASX shares that are undervalued and can beat the market, such as these top titles.
3 high quality growth shares to be purchased in 2019
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The # 1 is a dear old Australian company that turns its attention to high-margin companies … and quickly returns liquidity to shareholders with its heavy dividend …
While Stock # 2 is an online power that is rapidly gaining market share worldwide … ready for years (or even decades) of tremendous growth …
Even better, Stock # 3 offers a huge 6.5% dividend! That beats the rates of term deposits directly out of the water – and also offers the potential for capital gains.
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Tristan Harrison owns shares of Altium. Motley Fool The Australian parent company Motley Fool Holdings Inc. owns shares in and recommends Pro Medicus Ltd. Motley Fool Australia owns shares of A2 Milk and Altium. Motley Fool Australia has recommended Pro Medicus Ltd. and REA Group Limited. We Fools may not all have the same opinions, but we are all convinced that, considering a wide range of insights, we have become better investors. The Motley Fool has a disclosure policy. This article contains only general investment recommendations (with AFSL 400691). Authorized by Scott Phillips.
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