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Your one-stop guide to making $1 million on the share market

Getting rich and gaining that ‘millionaire’ status is a dream of most Australians, yet most individuals brush that fantasy to the side concluding that it is too difficult or practically impossible.

That’s largely because of the other important things in life that just seem to get in the way. I’m talking about the bills, the mortgage, family holidays and paying for the children’s education.

In reality however, getting rich from the market is neither too difficult nor impossible. In fact, it can be quite easy, provided that you are prepared to remain patient and composed through the process.

What’s more, a large deposit isn’t necessary either. By making what would be considered a small investment today could see you gain that ‘millionaire’ status within just 30 years (and that’s being conservative).

In just a moment, I’ll show you exactly how this is all possible…

But first, I want to reiterate that this is a very lazy way to become rich. One of the most important elements to the success of this strategy is that, most of the time, you need to be willing to sit on your hands and do absolutely nothing.

That’s where the self-control and patience elements come into play…

As we’ve seen in recent months, the stock market can be a volatile place, and those investors who crack under pressure are much less likely to succeed at getting rich.

Why?

Because the real gains are made over the long term, not in the space of a few months or years. By following the fundamentals of investing and choosing high-quality stocks, your wealth is highly likely to grow substantially over the decades.

Even though those fluctuations can sometimes be downright scary, it’s important to remember that the Australian stock market has managed to rise, on average, 12% per annum since 1900, according to AMP’s Dr Shane Oliver.

That’s even through the Great Depression, two World Wars, the Dotcom Bust and the more recent Global Financial Crisis.

Needless to say, in today’s low interest rate environment, 12% per annum beats the pants off returns from term deposits or government bonds.

Let me fill you in on how this works…

For now, all you need to do is set $15,000 aside to invest in the market – ignoring the fact that the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) is hovering within just a few percentage points of a six-year high – and then be prepared to deposit another $100 into your portfolio on a weekly basis.

While that might seem impossible right now, that small sacrifice has the potential to be truly life changing…

When I said that the market has returned 12% per annum on average since 1900, I’m also well aware how difficult it is to beat or even match the market’s returns consistently. So I’ve taken a more conservative measure and based my calculations on you achieving a 9% return per year.

If you were to employ this method for one year – setting aside an initial $15,000 and making weekly injections of $100 – your portfolio would be worth $21,827 after one year. Not a bad start…

Extend that over five years, and you’d be looking at a figure just over $56,000.

Already, you can see that those gains are starting to pick up the pace…

Now, if you kept this strategy going for 30 years, achieving 9% per annum returns, you would have a portfolio worth a massive $1,014,281.

This is all made possible by the phenomenon of compound interest – a mathematical law once referred to by Albert Einstein as “the eighth wonder of the world”.

And like I said, that’s taking a conservative approach. By picking the right stocks consistently, you stand every chance of beating the market’s returns, which could see that figure balloon out to something even more amazing.

Picking the right stocks…

For those people just beginning their investing journey – or for those simply wanting to ramp up their returns – it can be difficult knowing which stocks stand the greatest chance of making strong capital gains.

While many would look at the market’s most well-known stocks such as Telstra Corporation Ltd (ASX: TLS) or Westpac Banking Corp (ASX: WBC), the big gains are likely to be made from other ASX stocks.

For instance, we’ve recently released two articles outlining the four stocks we would buy in 2015 if we had $10,000 to invest.

Those articles can be found here, and here.

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Motley Fool contributor Ryan Newman (@ASXvalueinvest) does not own shares in any of the companies mentioned.

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