Investing $10,000 and letting it grow without much intervention can be a smart strategy, thanks to the power of compound interest. For example, with an average annual return of 7%, that initial investment could grow to nearly $76,000 in 30 years! The magic lies in the ability of your returns to generate even more returns, allowing your wealth to snowball over time with minimal effort required. Here’s how to get started.
Get it going
While $10,000 may seem like a significant amount upfront, it can snowball to much larger sums over the decades with the help of compound interest. As your investment earns returns, those earnings get reinvested, compounding the growth year after year. For example, after 10 years at a 7% annual return, that $10,000 could grow to around $20,000. As it continues compounding, the growth accelerates even more in the following decades, turning what seemed like a large initial sum into a much larger portfolio.
Reinvesting dividends is another powerful strategy. By reinvesting the income generated from your investments, you allow those funds to keep working for you, increasing the compounding effect. Over time, this can significantly increase the total value of your portfolio, thus making it a key element in long-term wealth building, especially if you start early and stay patient.
Consider an ETF
Vanguard FTSE Global All Cap ex Canada Index ETF (TSX:VXC) on the TSX is a great choice for Canadians seeking long-term growth. With a 52-week range of $46.85 to $61.07 and a year-to-date return of 16.34% at writing, VXC offers solid momentum. Its relatively low price-to-earnings (P/E) ratio of 20.33 indicates a reasonable valuation. A dividend yield of 1.51% provides some income potential. With over $2 billion in net assets and a low beta of 0.99, it’s a stable option for investors looking to diversify globally.
VXC offers exposure to a broad range of international stocks, providing Canadians with a global portfolio in a single fund. Its performance and reasonable expense ratio make it an excellent “set-it-and-forget-it” investment. By holding this exchange-traded fund (ETF), investors can benefit from the growth of international markets without needing to track individual stocks or manage complicated portfolios. It’s a safe, diversified option for those seeking long-term gains.
Make it into money!
To turn an ETF like VXC into massive passive income, reinvest dividends in the early years to accelerate compounding. Over time, as the portfolio grows, investors can eventually start taking the dividends as income rather than reinvesting them. The steady growth of the international markets, paired with dividend income, makes VXC a strong candidate for building passive-income streams.
As the portfolio grows over the years, the dividends paid by VXC will increase, allowing you to transition from reinvesting to enjoying a steady stream of passive income. By continuing to hold the ETF, investors can let international exposure and global growth work in their favour, creating a reliable and growing income stream that requires little ongoing management. So, how much could you make in just one year from that $10,000 with another 16% in growth, plus dividends?
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | PORTFOLIO TOTAL |
| VXC – now | $60.33 | 166 | $1.23 | $204.18 | quarterly | $10,000 |
| VXC – 16% | $70 | 166 | $1.23 | $204.18 | quarterly | $11,620 |
Bottom line
In a nutshell, investing $10,000 in an ETF like VXC and letting it grow over time can turn into a significant amount through compound interest and reinvested dividends. Up to $1,620 in returns and $204.18 in dividends, totalling $1,824.18! With its global diversification, steady growth, and income potential, VXC offers Canadians a safe and solid choice for both long-term wealth-building and future passive income. By setting it and forgetting it, your investment can work for you, snowballing into something much bigger over the years with minimal effort.
