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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Last week the S&P/ASX 200 Index (ASX: XJO) was on form and recorded a very strong 1.6% gain to end the period at 5942.6 points.

While the majority of shares on the index pushed higher, some climbed more than most. Here’s why these shares were the best performers on the ASX 200 over the period:

The Clinuvel Pharmaceuticals Limited (ASX: CUV) share price was the best performer on the ASX 200 last week with a 21.3% gain. This was despite there being no news out of the biopharmaceutical company over the period. However, its shares have been on a strong upward trend over the last three months. So much so, they have almost doubled in value since this time in March. Despite this strong rise, Clinuvel remains one of the most shorted shares on the ASX.

The Healius Ltd (ASX: HLS) share price wasn’t far behind with a gain of 19.8%. Investors were buying the healthcare company’s shares last week after it announced the sale of Healius Primary Care, its medical centres business, to BGH Capital for $500 million. Management advised that the proceeds will be used for investments and to pay down debt.

The Appen Ltd (ASX: APX) share price was a very strong performer last week with a 14.7% gain. This gain appears to have been driven by a broker note out of Macquarie. According to the note, the broker has initiated coverage on the artificial intelligence company with an outperform rating and $38.00 price target. Macquarie believes that Appen’s Relevance segment is well placed for long term growth. Appen’s shares ended the week at $33.83.

The Viva Energy Group Ltd (ASX: VEA) share price wasn’t far behind with a 14.2% gain. Last week the fuel retailer released a trading update which included better than expected guidance for the first half. Viva Energy expects its underlying net profit after tax (on a replacement cost basis) to be in the broad range of $20 million to $50 million. This was notably higher than the consensus estimates and led to a number of brokers upgrading their price targets.

More reading

• How to become a millionaire in 25 years with $20 a day
• Short-sellers are stepping up their attack against these popular ASX shares
• ASX 200 up again, ASX retailers make big gains
• These 3 ASX ETFs are yet to recover from the market crash
• Investing experts warn of second ASX market crash

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Appen Ltd. 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 These were the best performers on the ASX 200 last week appeared first on Motley Fool Australia.

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The S&P/ASX 200 Index (ASX: XJO) was on form last week and recorded a solid 1.6% gain to end at 5942.6 points.

Unfortunately, not all shares on the index were able to follow the market higher last week. Here’s why these shares were the worst performers on the ASX 200:

The Pilbara Minerals Ltd (ASX: PLS) share price was the worst performer on the ASX 200 last week with a 14.5% decline. The lithium miner’s shares crashed lower ahead of its exclusion from the benchmark index on Monday at the June quarterly rebalance. Index tracking exchange traded funds and fund managers with strict investment mandates were potentially selling its shares.

The Mayne Pharma Group Ltd (ASX: MYX) share price wasn’t far behind with a 13.6% decline. As with Pilbara Minerals, this decline appears to have been driven by the pharmaceutical company’s exclusion from the ASX 200. Heading into the index at next week’s rebalance will be the likes of Megaport Ltd (ASX: MP1) and Mesoblast limited (ASX: MSB).

The Orora Ltd (ASX: ORA) share price was out of form and fell 12.2% last week. All of this decline came on Friday when the packaging company’s shares traded ex-dividend for its massive special dividend. Eligible Orora shareholders will receive its 37.3 cents per share dividend in their bank accounts on 29 June 2020. This dividend was the equivalent of a 15% yield based on its last close price. It was declared following the sale of Orora’s fibre business to Nippon Paper.

The Fortescue Metals Group Limited (ASX: FMG) share price was some distance behind with a decline of 6.9%. This appears to have been driven by a spot of weakness in the iron ore price and profit taking after a strong gain in 2020. Even after last week’s decline, Fortescue’s shares are up 28% since the start of the year.

More reading

• ASX 200 up again, ASX retailers make big gains
• ASX 200 up 0.9%: Big four banks rebound, Appen hits record high
• Is the Downer EDI share price in the buy zone?
• Why Air NZ, Evolution, Orora, & Suncorp shares are dropping lower
• 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 MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO. 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 These were the worst performers on the ASX 200 last week appeared first on Motley Fool Australia.

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