We may not all agree on which ASX shares are buys and sells, but one thing I'm sure we all agree with, is that it would be a dream to become a stock market millionaire.
But how realistic is it for retail investors with limited funds to achieve this?
Well, the good news is that if you have time on your side and patience to invest over a long period, then I believe it is possible.
Having a head start
If you're in a fortunate position to be able to start your investment journey with $100,000, then you are part way there.
According to Fidelity, the Australian share market has returned an average of 9.58% per annum over the last 30 years.
And while past performance does not guarantee future returns, I would be disappointed if the market didn't deliver the same level of return over the next three decades.
If it does, thanks to the power of compound interest, it would take a touch over 25 years for a single $100,000 investment to turn into $1 million if you earned the market return.
Starting from scratch
Unfortunately, we don't all have $100,000 sitting in a bank account ready to invest. Wouldn't it be nice if we did!
So, if you're starting from scratch, you'll have to come up with a long term investment strategy.
This would involve investing $500 a month ($6,000 a year) into ASX shares and averaging a 10% per annum annual return. Compound interest would then turn this into $1 million after 28 years.
Building a portfolio
If you're wanting to generate a 10% per annum return, I would do this by building a diversified portfolio filled with 10 quality ASX 200 shares that have strong business models and bright outlooks.
For me, 10 seems like a nice size for a diversified portfolio. It also forces you to think long and hard about your investments if you have to be more selective, which could help you avoid buying a dud.
But how do you choose? When looking at shares, you could ask yourself if this is an investment that Warren Buffett would make. He has a penchant for making long term investment in companies with competitive advantages or moats.
ASX 200 shares such as CSL Limited (ASX: CSL), REA Group Limited (ASX: REA), ResMed Inc (ASX: RMD), SEEK Limited (ASX: SEK), and WiseTech Global Ltd (ASX: WTC) spring to mind and could be worth investigating further.
But with time your greatest asset when investing, I would start putting my plan into action today, by hunting for just those sorts of shares!
