How I’d invest $20,000 in ASX 200 shares to aim for a million

top asx shares to buy in summer or to retire represented by piggy bank on sunny beach

top asx shares to buy in summer or to retire represented by piggy bank on sunny beach

Wouldn’t it be nice to grow your ASX share portfolio from $20,000 to $1 million?

Well, the good news is that this is entirely possible. All you need is time, patience, a portfolio of high-quality ASX 200 shares, and compounding.

How to turn $20k into $1 million with ASX 200 shares

Historically, the stock market has provided investors with an average annual return of approximately 10% per annum.

And while there is no guarantee that it will continue to generate returns of this nature in the future, if it were to do so, your single $20,000 investment would grow into $1 million after 41 years.

Maybe that’s too long for you? If it is, don’t worry. All you need to do is add to your portfolio each year and you’ll cut down the time it takes to reach your million-dollar target.

For example, if you were able to invest $20,000 each year, your portfolio would grow to our target value after 17 years.

Alternatively, starting with a $20,000 investment and then investing $10,000 into high-quality ASX 200 shares each year would get you to $1 million in 22 years if you averaged 10% per annum.

Which shares should you buy?

I would aim to buy quality over quantity and focus on building a portfolio filled with ASX 200 shares that have the following characteristics:

  • Competitive advantages
  • Fair valuations
  • Strong long-term growth prospects
  • Sizeable addressable markets
  • Growing dividends

A few ASX shares that spring to mind immediately are gaming technology company Aristocrat Leisure Limited (ASX: ALL), hearing solutions specialist Cochlear Limited (ASX: COH), and sleep treatment company ResMed Inc (ASX: RMD).

Over the last decade, these ASX shares have generated average annual total returns of 26.7%, 13.4%, and 22.4%, respectively. And based on their qualities, I would not be surprised to see them beat the market over the next decade.

The post How I’d invest $20,000 in ASX 200 shares to aim for a million appeared first on The Motley Fool Australia.

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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 Cochlear and ResMed. The Motley Fool Australia has positions in and has recommended ResMed. The Motley Fool Australia has recommended Cochlear. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia

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