Everyone, or at least everyone reading The Motley Fool, wants to achieve financial freedom.
But investing isn't easy. Otherwise everyone would be rich!
Although the biggest headlines are for stories of people who strike gold overnight, the reality is that most of the truly wealthy built up their assets over a long period of time.
So how does one do this?
Don't try to time the market
Timing the market is fraught with danger because no one knows what will happen later today, let alone tomorrow, next week, or next year.
If you sell too many shares then you risk holding useless cash when the market recovers from a dip. That's when the most money is made.
A remarkable table from Betashares earlier this year showed how the 20 biggest single-day rallies on the ASX since 1 June 1992 all occurred in the aftermath of horrible market crashes.
"The more of those big rallies that you miss out on, the lower your gains over the long term," said Betashares executive Annabelle Dickson.
"An overwhelming body of research finds that [a] passive buy-and-hold, long-term approach to owning shares produces better long-term results."
Pick quality, rather than risky stocks
We've all heard the stories at the BBQ about acquaintances that watched their stock become a 10-bagger over just two years.
That's fantastic, but ASX shares that do that are usually risky propositions before they have grown 10-fold.
For every one of those that returned 1,000%, there will be a whole bunch of similar ones that burned a hole in their investors' pockets.
Becoming wealthy slowly involves buying stocks that might not explode or crash like that but will more reliably produce smaller annual returns.
Those stocks more often represent larger, more mature companies that already have a decent customer base.
And over time, a string of years with positive returns will see your asset grow handsomely.
Save and invest often
Adding to the portfolio, unsurprisingly, is an excellent way of building wealth in the long run.
There are two ways of achieving this: saving a portion of your regular income to put towards investing, and ploughing any dividends back into shares.
Earlier this year, stock expert Brian Feroldi revealed how an investor's saving rate is far more important than a high income or investment returns.
Sure, having a high income makes it easier to put some aside for investing, but it in itself doesn't make you wealthy.
"Just ask some of the highly-paid celebrities and athletes who [end] up filing for bankruptcy protection — Mike Tyson, Nicholas Cage, Lindsay Lohan," he said.
High investment returns are also lovely. But if you haven't saved enough to invest then you won't be able to get any returns — let alone big ones.
"This is why your savings rate is so important. It's the small input that can [reliably] predict your ability to become wealthy."
