If you want to become a millionaire, you have a few options. You can save for it, you can invest, or you can win the lottery.
If winning the lottery were easy, I would suggest you take that route. But with the odds stacked firmly against you, it might be more fruitful to take action yourself by saving or investing.
I believe the latter is the better option given the historically stronger returns you generate ahead of savings accounts.
And while there are plenty of things you can invest in, ASX shares lead the way over the long term.
According to Fidelity, Australian shares generated an average total return of 9.55% per annum between December 1991 and December 2022.
This would have turned a single $10,000 investment into approximately $155,000 over the period.
As a comparison, according to Aussie, between December 1991 to December 2021, the housing market had generated 30-year annualised growth for houses and units of 5.6% and 4.7%, respectively. Not shabby, but also not comparable to ASX shares.
But which ASX shares should you buy?
Investors might want to take a leaf out of Warren Buffett's book when it comes to choosing which ASX shares to buy.
After all, this week the Oracle of Omaha revealed that his Berkshire Hathaway business has delivered a staggering average return of 19.8% per annum since 1965.
Buffett is well-known for taking a long-term approach when making his investments, allowing him to benefit from compounding. He also looks for wonderful companies that are trading at fair prices. These are companies that have strong and enduring competitive advantages and are run by talented management.
How to become a millionaire?
As you saw above, the Australian share market has returned an average of 9.6% per annum over the last 30 years.
While there's no guarantee that it will do the same over the next 30 years, if it were to do so and you matched the market return, you could grow your portfolio to $1 million by making consistent monthly investments of $500 (or $6,000 a year).
Investors could speed up the process if they can afford to put more into the market each month.
For example, ceteris paribus, an investment of $1,000 per month into ASX shares would grow to $1 million after 23 years. Or go all in with $2,000 per month and you could be a millionaire after 17 years.
Overall, anything is possible if you have a plan and the discipline to stick to it over the long term, just like Buffett has done.
