I’m a massive fan of buy and hold investing and continue believe it is the best way for investors to grow their wealth.

To demonstrate how successful it can be, every so often I like to pick out a number of popular ASX shares to see how much a single $20,000 investment 10 years ago would be worth today.

This time around I have picked out the three ASX shares that are listed below:

CSL Limited (ASX: CSL)

Over the last decade CSL has become one of the largest biotech companies in the world. This has been driven by its high level of investment in research and development, which has created a portfolio of lifesaving and highly profitable therapies. This portfolio has underpinned consistently strong earnings and sales growth over the last 10 years, which has ultimately led to its shares generating an average total return of 24.7% per annum. This would have turned a $20,000 investment in the company’s shares into $182,000 today. The good news is that CSL still appears to have a long runway for growth thanks to its very promising development pipeline and the positive outlooks of its CSL Behring and Seqirus businesses.

Fortescue Metals Group Limited (ASX: FMG)

The Fortescue share price has been a strong performer over the last 10 years. It may not have been a smooth ride, but its shares have beaten the market over the period with an average total return of 14.55% per annum. The majority of these gains have been made over the last five years thanks to favourable iron ore prices, the material improvement in its balance sheet, and a significant reduction in its operating costs. This means that a $20,000 investment in its shares in 2010 would be worth $78,000 today.

Nanosonics Ltd (ASX: NAN)

Over the last 10 years the Nanosonics share price has been among the best performers on the market. Thanks to the strong growth in the installed base of its trophon EPR ultrasound probe disinfection system and the increasing recurring consumable revenues the product is generating, this infection control specialist’s shares have generated a total return of 28.42% per annum. This would have turned a $20,000 investment in its shares 10 years ago into just under $250,000 today. Pleasingly, with the company on the cusp of releasing several new products, I suspect this strong form could continue over the next 10 years.

More reading

• These were the worst performers on the ASX 200 last week
• 3 ASX growth shares that could be future market beaters
• Why I’m desperate to add CSL and 2 other ASX shares to my portfolio in 2020
• Is the Downer EDI share price in the buy zone?
• Where to invest for reliable dividend shares

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. and Nanosonics Limited. The Motley Fool Australia has recommended Nanosonics Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post How to turn $20,000 into $250,000 in 10 years with ASX shares appeared first on Motley Fool Australia.

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Do you want to become a millionaire in 25 years by investing just $20 a day?

In this article I’m going to show you how it could work.

Reaching $1 million seems like a great goal for the average Aussie. Becoming a ‘millionaire’ has a nice ring to it. However, don’t get caught thinking that means driving a Ferrari. Inflation has meant $1 million isn’t quite as impressive as it was 25 years ago.

Why 25 years to become a millionaire? Why not 10 years?

It’s important to be realistic with your financial goals. The more unrealistic you make your goals the more likely it is you’ll never reach that goal. ‘Get rick quick’ schemes lure people in with dreams of a luxurious lifestyle, but they don’t warn of the risks, the fees and the low chance of success. 

I think 25 years is a good timeframe because it gives an investment a long enough time to utilise compound interest, but 25 years doesn’t mean your whole life either.

Even the richest people in the world take time to grow their wealth and businesses. For example, Warren Buffett didn’t become a billionaire until he was 56. He added all those other billions to his net worth when most people are thinking about retirement.

You may only need $20 a day to become a millionaire

As long as you have a decent income, I think it’s possible to find $20 a day. The most important thing for your budget is to not get stuck into expensive monthly payments you can’t afford. Your home, a car loan – those big ticket items can really drain your monthly budget.

If you can save $20 a day, that’s $140 a week or $7,300 a year. If you save $20 a day then that amounts to around $146,000 over 25 years.

You might say: “Hang on. That’s not even close to $1 million.” Stuffing $146,000 under the mattress or into a safe isn’t going to compound into $1 million.

The best interest rates from savings account you can find right now in Australia are around 2%. If your daily $20 saving compounded at 2% per year you’d finish with $233,821.

I think you need to invest in (ASX) shares to make the required returns to become a millionaire these days. Businesses have the ability to generate strong returns and re-invest for growth.

If you invested $20 a day for 25 years, it’d be possible to make $1 million if you were making returns of 12.25% per annum.

It’s difficult to generate those types of returns, you’d have to find great growth shares at a fairly early stage of their growth. Shares like A2 Milk Company Ltd (ASX: A2M), Afterpay Ltd (ASX: APT), Appen Ltd (ASX: APX), REA Group Limited (ASX: REA) and Xero Limited (ASX: XRO) have generated very strong returns for early investors. Names like Amazon, Netflix, Alphabet/Google, Facebook, Visa and Mastercard are international names that have made great returns over the years.

Two of my preferred small cap ideas right now are Bubs Australia Ltd (ASX: BUB) and Pushpay Holdings Ltd (ASX: PPH) for long-term returns.

However, I think it’s important to remain realistic. You may not find many of these growth shares early on. 

A realistic scenario of 10% returns

Let’s alter a few of the assumptions a little. The share market has returned an average of 10% over the long-term, so let’s use that growth rate. Let’s assume you’ve already been doing some saving and you’ve got $10,000 ready to invest at the start of the process. But to become a millionaire you’d need to save a little more per year (if shares return 10% a year), you’d have to save an average of around $25 a day.

Foolish takeaway

I think it’s possible for the average Australian household to achieve what I’ve outlined, particularly when you add the mandatory superannuation contribution amounts (and lower taxes within super) into the mix. If you’re younger you may not be able to commit much money at the start, but you can then invest a lot more in your later years as your earnings hopefully increases.

More reading

• These were the best performers on the ASX 200 last week
• Grow your wealth with these 3 ASX fintech shares
• Why the Splitit share price has shot up 135% in 2 days
• Brokers just upgraded these ASX 200 stocks to “buy” today
• Brokers name 3 ASX 200 shares to buy today

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BUBS AUST FPO and Xero. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. The Motley Fool Australia owns shares of A2 Milk, AFTERPAY T FPO, and Appen Ltd. The Motley Fool Australia has recommended BUBS AUST FPO and REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post How to become a millionaire in 25 years with $20 a day appeared first on Motley Fool Australia.

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