Building an ASX portfolio of shares with a value of a million dollars is hard, yet doable. What you need is the right mindset, the right investments, the right amount of time and the secret ingredient of compound interest!

Let’s get into the nuts and bolts of a million-dollar portfolio.

The path to a million

If you were building a portfolio with monthly $1,000 contributions, it would take just over 61 years to accumulate a million-dollar portfolio if you used term deposits and savings accounts that pay a 1% interest rate.

But that’s where ASX shares come in.

See, by investing in growth assets like shares, you can get a return that’s far above what a high-interest bank account will provide these days.

Let’s take a simple ASX index fund like the Vanguard Australian Shares Index ETF (ASX: VAS). This exchange-traded fund (ETF) has delivered an average return of 7.63% per annum since its inception in 2009.

Investing your $1,000 a month in this ETF will shorten these 61 years to just 26.5 years if we assume the same rate of return and reinvest all dividends.

But let’s say you learn all about investing, take some of the lessons we Fools try and divulge for good investing practice and manage to invest for a higher return than a broad market ETF – let’s say we’re aiming for a 10% return per annum.

Then, the 26.5 years will be whittled down to 22.5.

If you manage an exceptional 15% per annum? It’s 17.5 years, and on and on it goes.

Now you can understand how the great Warren Buffett became a billionaire over his life by managing a compounded rate of return above 20% per annum!

How hard is it to beat the market?

Of course, beating the market over 20 years is difficult – most ASX investors don’t manage it. But if you find great companies, invest in them at a great price (or even just a good price), and don’t do anything silly (like sell the shares in a crash), you can do it.

And you don’t even need to find too many winners – just one can be enough to propel an ASX portfolio to market-beating returns. Warren Buffett has 99% of his capital in just one company (Berkshire Hathaway), after all.

And that’s how you can build a $1,000,000 ASX share portfolio by investing $1,000 a month.

It’s no summer project, that’s for sure! Your success with investing will dictate just how long it will take. But for investors with the ambition and the patience, it can be done.

More reading

• Why a buy and hold strategy for ASX shares is best
• The smartest ASX shares to buy if you have $2,000
• Want to become wealthy? Do this one thing
• 3 ASX dividend shares for income investors to buy next week
• Here’s why the laziest ASX investors end up the richest

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Here’s how to create a $1 million ASX portfolio by investing $1,000 a month appeared first on Motley Fool Australia.

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With the cash rate at a record low of 0.25% and some tipping it to go even lower, the interest rates on offer with term deposits and savings accounts look set to stay lower for longer.

In light of this, I believe income investors ought to consider investing in some of the high quality dividend shares on the ASX for income.

Three that I would buy are listed below:

Dicker Data Ltd (ASX: DDR)

I think this distributor of information technology products would be a good option. It has been a very strong performer during the pandemic and recently reported a 36.3% increase in first quarter net profit before tax to $18.4 million. This has been driven partly by increasing demand for software and hardware to support working from home initiatives. As a result of this strong performance, the company advised that it plans to pay a fully franked dividend of 35.5 cents per share in FY 2020. This will be up 31% year on year and represents a fully franked 5.1% yield.

Transurban Group (ASX: TCL)

If you’re not in immediate need of income, then this toll road operator could be a good option. Due to the sharp reduction in traffic volumes on its roads during the pandemic, I suspect Transurban could scrap its final distribution in FY 2020. However, I feel it is worth being patient and expect its distributions to recover over the coming years as traffic volumes eventually normalise. I estimate that its shares offer investors distribution yields of 3.3% and 4.5% in FY 2021 and FY 2022, respectively. 

Wesfarmers Ltd (ASX: WES)

Wesfarmers is one of Australia’s leading conglomerates and the company behind countless recognisable brands. These include Bunnings, Kmart, Target, online retailer Catch, and Officeworks. The company also has exposure to the chemicals and industrials industries through a wide range of businesses. Combined, I believe Wesfarmers is well-positioned to grow its earnings and dividends at a solid rate over the coming years. At present I estimate that its shares offer a forward fully franked ~4% dividend yield.

More reading

• 2 quality ASX dividend shares for retirement income
• Where growth, income, and value investors can invest $5,000 today
• 2 exciting ASX tech shares to buy right now
• Losers of Virgin Australia’s potential nationalisation
• 3 top ASX dividend shares you can buy today for income

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. The Motley Fool Australia owns shares of Transurban Group and Wesfarmers 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 3 top ASX dividend shares to buy next week appeared first on Motley Fool Australia.

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