If you are fortunate enough to have $3,000 in your Commonwealth Bank of Australia (ASX: CBA) savings account and no plans for it, I think it could be worth using it to start investing today.
While it will be gaining interest in your savings account, that will barely be enough to keep up with inflation in the current environment.
Whereas the share market has traditionally provided investors with an average total return of approximately 10% per annum over the long term.
This is vastly superior to savings accounts and could compound your money into something significant in the future if you are willing to be patient.
Let’s look at what $3,000 could become if you were to start investing it into ASX shares.
Start investing with $3,000 of savings
As mentioned above, the share market has achieved a return of approximately 10% per annum over the long term.
And while there is no guarantee that this will be the case in the future, I believe it is fair to base our assumptions on this level of return.
With that in mind, a single $3,000 investment into ASX shares would grow to become worth almost $8,000 in 10 years if you matched the market return.
But if you leave it to compound further, then it would grow to approximately $20,000 after 20 years, then $52,000 after 30 years, and $135,000 after 40 years.
And that is just a single investment. Chances are, over the years you will have extra funds that you can invest into ASX shares. Doing this could have a huge impact on your wealth.
Contributing more
Let’s imagine that when you start investing you add an extra $3,000 to your investment portfolio every year instead of just a one-off investment.
If you did this and matched the market return, you would have a portfolio valued at approximately $60,000 after 10 years.
And if we keep going with this investment strategy for longer, you would have approximately $200,000 after 20 years, $600,000 after 30 years, and a whopping $1.6 million after 40 years.
The latter means that someone in their early twenties that starts investing today could potentially have a million-dollar ASX share portfolio before they retire.
Overall, this demonstrates that making consistent investments into ASX shares has the potential to generate significant wealth. The key is to have a plan and stick with it over the years.
The post $3,000 in savings? Here’s how I’d use that to start investing today appeared first on The Motley Fool Australia.
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More reading
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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 no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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