We would all love to retire with a $1 million nest egg. That would be more than enough to fund a comfortable retirement, at least according to the Association of Superannuation Funds of Australia (ASFA).
But sadly, most Australians today don't have enough in superannuation to make this happen on its own. As such, the best way we can hope to get to a seven-figure nest egg by the time we reach retirement age is by investing in ASX shares outside superannuation.
So today, let's talk about three ASX hacks you can use to hopefully get to a retirement nest egg of $1 million one day by investing in the share market.
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3 ASX hacks to help get to a $1 million nest egg
Put your investing on autopilot
I think the best way to invest in ASX shares, particularly for someone who doesn't get a thrill out of the whole process, is to automate your investing. Make a commitment to yourself to invest $100, $200 or $500 a month (or whatever you can afford) into your nest egg, and stick to it as best you can. Rain, hail or shine.
Most investors get hamstrung from time to time by thinking that, for whatever reason, the present isn't a good time to invest. You might be expecting a stock market crash, or have read some professional investors' predictions of an economic slowdown.
You want to avoid all of that. So make a plan and stick to it as closely as you can. Hopefully, you can even forget you're doing it. By the time five, ten or 20 years go by, you'll almost certainly notice some real changes to your wealth if you do so.
Reinvest your earnings and dividends
Investing in ASX shares pays dividends. Literally. Chances are that if you own ASX shares, you'll regularly receive dividend payments. This passive income is one of the best and most obvious benefits of owning shares.
But many people treat this income as disposable and simply add it to their everyday bank accounts, where it is quickly frittered away.
This would be a big mistake. Dividends form a huge component of the overall returns we enjoy from our share market. So siphoning these away from your portfolio is kneecapping the wealth-building effects you might otherwise enjoy from investing.
As such, if you're looking to build wealth as efficiently and effectively as possible, make sure you are always reinvesting your dividends back into ASX shares. That way, you'll receive even higher levels of income next dividend payday, kickstarting a virtuous cycle.
You can turbocharge this ASX hack further by investing any windfall earnings you might receive. These could be a tax return or an insurance payout. Any spare cash you can direct into your ASX portfolio brings that $1 million nest egg closer.
ASX hack: Keep your investing simple
Finally, and perhaps most importantly, I think almost every ASX investor who is aiming to build a $1 million nest egg through the stock market needs to keep their investing simple.
The worst thing an investor can do is get ahead of themselves and invest in the wrong stocks. Nothing is more demoralising than losing all your money on a couple of bad stock picks and having to start all over again from square one.
If you have a passion for investing and picking undervalued stocks, then, by all means, go for it. But if you're a 'check your portfolio once a month' kind of investor, it might be better to stick with simple, hands-off investments like index funds.
An index fund like the iShares Core S&P/ASX 200 ETF (ASX: IOZ) or even a listed investment company (LIC) like Argo Investments Ltd (ASX: ARG) are great choices for hands-off investors. They basically do the hard yards of investing for you and are perfect for putting your regular investments on autopilot.
