Every investor's dream is to become an ASX millionaire.
Many investors are familiar with how the world's richest, most talented, and most famous investors made their fortunes.
While it's certainly interesting to discover how the likes of Warren Buffett, Charlie Munger, and Peter Lynch became incredibly wealthy, it's not always the most relatable.
Instead, it can be incredibly motivating to learn how average Australians became millionaires through investing in ASX shares.
A recent article in the Australian Financial Review unpacked the journey of an investor who built a $1.5 million portfolio in 5 years.
Image source: Getty Images
How did he do it?
Five years ago, 52-year-old Melbourne-based investor Richard Ye set out to build a $1 million portfolio.
After a 25-year career in finance, Ye had built a cash pile of $250,000, which was his starting balance.
He committed to making regular contributions to his portfolio.
Instead of relying on financial planners and advisors (which he estimated would have cost him more than $22,500 a year), he spends just $1,800 annually on investment research.
Dollar-cost averaging with a twist
Ye primarily relied on dollar-cost averaging to deploy his money.
This method aims to take the guesswork out of investing. Instead of trying to 'time the market' and make short-term predictions, adherents of this strategy invest consistently and regularly, regardless of market sentiment.
Very few investors are able to time the market. It can be unpredictable and irrational. Dollar cost averaging suits investors such as Ye with long investment horizons.
However, Ye didn't follow this strategy blindly. There was a twist.
He paused investing when a commonly watched technical indicator showed the S&P 500 Index (SP: .INX) as being overvalued.
Ye told the Australian Financial Review:
If the S&P 500 is a certain percentage higher than the 50-day and 200-day moving average, I will pause for a while until the moving average comes closer.
If it is a bear market, it is easiest for me. But if it is a bull market, sometimes I will spend more time thinking about investing. I only buy relatively low. I don't necessarily sell, I just pause my investment.
What does he invest in?
Another relatable part of Ye's story is the composition of his portfolio.
His strategy is refreshingly simple.
He currently owns five exchange-traded funds (ETFs), which are a combination of index funds and thematic ETFs.
They are: two equally weighted ETFs that track the US and Australian markets, as well as the Betashares Nasdaq 100 ETF (ASX: NDQ), the Betashares Australian Resources Sector ETF (ASX: QRE), and the Betashares Global Cybersecurity ETF (ASX: HACK).
Ye also directly owns Alphabet Inc (NASDAQ: GOOG) and ASX Ltd (ASX: ASX).
Low-cost brokerage allows Ye to make regular investments into these funds while keeping expenses down.
Future ambitions
Ye has already surpassed his goal of becoming an ASX millionaire.
Now, he is aiming to reach $5 million before the age of 67.
He estimates this would allow him to generate an annual income of between $300,000 and $500,000 for his retirement years.
Foolish Takeaway
Many investors assume they need to invest in 10-bagger investments to become an ASX millionaire. However, Ye's story shows that a 'get rich' slow approach can get you there, as long as you're consistent and rational.
