Why I’d drip-feed $500 a month into ASX 200 shares, starting now

The ASX share market has generated returns of 10% per annum over the ultra-long term, which is why S&P/ASX 200 Index (ASX: XJO) shares could be the right place to invest $500 per month steadily.

We can’t become millionaires instantly unless we win the lottery, but the steady investment approach can lead to long-term success in a ‘get rich slowly’ strategy.

I’m going to outline how investing $500 per month could compound into a very pleasing amount over time.

Why ASX 200 shares?

The ASX 200 represents a list of 200 of the biggest businesses on the Australian Securities Exchange by market capitalisation. They are among the most significant in the country — even the world — at what they do.

For example, Commonwealth Bank of Australia (ASX: CBA) is the biggest bank in Australia, BHP Group Ltd (ASX: BHP) is the world’s largest miner, Goodman Group (ASX: GMG) is a global industrial property developer and owner, Telstra Group Ltd (ASX: TLS) is Australia’s biggest telco, and WiseTech Global Ltd (ASX: WTC) is a leading global logistics software provider.  

Thanks to their brand power or scale, the industry leader can often earn the biggest margins and profits. Ongoing re-investment in the business can deliver satisfactory profit growth and capital growth.   

Now, I don’t know what the shareholder returns are going to be for a specific company or the overall ASX 200, but I’m optimistic about the future. ASX 200 shares can continue to grow profit, with Australia’s growing population being a tailwind for earnings.

Invest $500 per month

The minimum investment that a broker normally requires for a trade is $500, so that could be a good starting amount to invest. Or, investors could save more and make a bigger investment – some brokers have a very low cost for a transaction with a value of under $1,000.

Using a compound interest calculator, if we invest $500 per month and that money returns an average of 10% per annum, it will turn into $1 million in just over 30 years.

If that’s not quick enough for you, there are two main ways to bring forward millionaire status. First, we could invest more – investing $1,000 per month would mean hitting $1 million in less than 24 years. That shows that simply investing an extra $500 per month can shave off six years of the timeframe.

We could also aim to invest in the best ASX 200 shares possible, which could increase returns. For example, investing $1,000 per month and having a portfolio return an average of 12% per annum could reach $1 million in less than 22 years.

In my mind, there’s no better time to start investing than now. The earlier we can start the ball rolling, the better.

The post Why I’d drip-feed $500 a month into ASX 200 shares, starting now appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• 5 things to watch on the ASX 200 on Wednesday
• Here are the top 10 ASX 200 shares today
• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Tristan Harrison 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 Goodman Group and WiseTech Global. The Motley Fool Australia has positions in and has recommended Telstra Group and WiseTech Global. 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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