History has shown that investing in ASX shares is a great way to create substantial wealth.
However, unless you get incredibly lucky buying a microcap that rockets to mid-cap or large-cap status, your journey will take time.
But don't let that stop you from taking the first step. After all, your future self will undoubtedly be very thankful if you do.
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Is it possible to become a multi-millionaire with ASX shares?
Over the years, the Australian share market has proven to be a fertile ground for investors seeking to build their wealth.
Over the last 30 years, ASX shares have generated an average annual return of approximately 10%.
While we cannot guarantee that this will be the case over the next three decades, we're going to assume that it does for the purpose of this article.
Based on this return and the magical power of compounding, it would be possible to build a multi-million dollar investment portfolio.
For example, if you were in a position to invest $12,000 per year (the equivalent of $1,000 per month) into ASX shares, your portfolio would grow to be worth approximately $2.2 million after 30 years.
And if you kept going for another five years, compounding would go into overdrive and take your portfolio to approximately $3.6 million, ceteris paribus.
This then gives you a few options. You could keep going to build further wealth, you could withdraw your funds, or you could turn your focus to income.
In respect to the latter, if you transformed your portfolio to an income focus with an average 5% dividend yield, you would be receiving $180,000 of passive income each year (and growing).
How do you do it?
Investors could simply invest in ASX ETFs if they're not keen on stock-picking. But if they want to build their own portfolio, they might want to look at companies with positive long-term outlooks, sustainable competitive advantages, and strong business models.
These are the qualities that Warren Buffett looks for when making investments for Berkshire Hathaway (NYSE: BRK.B).
And given how the Oracle of Omaha has delivered an average return of almost 20% per annum since 1965, it certainly could pay to follow his lead.
The main thing, though, is to be patient and stick with your plan through thick and thin. After all, the rewards could be staggering for your wealth.
