Time is your greatest asset.
Have an investment horizon that is greater than 20 years, preferably 30 years. Let compounding do its thing, and the only thing left to do after that, is to wait patiently.
Patience is the key. Being consistent is the key.
The most important ingredient in investing, as with other similar challenges in life, such as weight loss, or to quit smoking, etc., is being consistent.
Here's an advice from a person who has supposedly done it, (msk from bogleheads forum*):
* I don't know msk other than few of his posts I've read on the forum
"Re: First time investor looking to jump in market but apprehensive with record highs
Post by msk » Tue Nov 21, 2017 10:15 am
I lived by these rules-of-thumb since my student days, retired early at 55, now at 73. Your life trajectory will be different, but these rules did well by me, currently at 8 figures NW:
1. Save and invest 30% of after tax income. Payment of principal on a home mortgage counts, but not interest.
2. Never buy a house worth more than 3x annual income, or 2.5x joint income. You may afford the monthly payments but expensive homes carry expensive maintenance commitments, be it landscaping or air conditioning.
3. Never acquire a car (or cars if multiple), by purchase or lease, worth more than 6 months income.
The most important one is 1. If you practise that diligently you never have to think of when you are jumping in, timing, since your investments in subsequent years will be much larger than your initial buy into the stock market. The stock market is almost always at its highest, so trying to time it is a toss up, with you as the probable loser. If the stock market makes you terribly nervous, perhaps you can repay some of that large mortgage. It'll 'earn' you an interest rate higher than bonds, and unless you have been very unlucky in choosing your home, its value ought to keep up with inflation, perhaps even rise beyond that, possibly even well beyond inflation in a HCOL area. IMHO there is no such thing as a forever home in your 30s. If you satisfy 1. above you will almost certainly be much wealthier in your late 40s than you are now, and probably will wish to upgrade... Anyway, I have always considered paying off the mortgage on my home as a high priority, if only for the feeling of security. Keeping a lot of cash aside for possible renovations, etc. is IMHO a waste of investment time. Fund the renovations from next year's 30% savings, or the following years'..."
"Re: Finding a direction - What next?
Post by msk » Sat Nov 25, 2017 3:14 am
Too much paralysis by analysis. Just open a brokerage account (Interactive Brokers is my current favorite), fill out all your tax advantaged opportunities, use your surplus savings to purchase VT (Vanguard Total World) and then spend more time analysing and contemplating what next, how to fine tune, 3 ETFs, etc. Pity, you just missed a ludicrously good, irrationally exuberant stock market year (up 20+%!) while awaiting revelation. Revelation ain't coming. Save and invest 30% of after tax income, year in, year out. What you do with the rest does not matter much. I just worked out what you can look forward to, if the next 50 years is similar to the past 50, totally invested in the SP 500 from age 30 and a $50k income:
Mediocre careers with your incomes just keeping up with inflation: you can retire at age 57 with a Net Worth of $2.5 million
Average careers with your incomes rising at 1% p.a. above inflation: you can retire at age 60 with a Net Worth of $3.8 million
Good careers with incomes rising at 2% p.a. above inflation: you can retire at age 64 with a Net Worth of $6.7 million
I define free-to-retire-age at a point when your Net Worth = 25xIncomex0.7 (since you no longer have to save and invest that 30%). It comes later with better careers since your income rises much higher, but in all cases you do not need to drop your standard of living an iota upon retirement. Save and invest 30% of after tax income, today onwards. That's what matters, the rest are just details that you can analyse ad nauseam over the next 3 decades :annoyed"
https://www.bogleheads.org/forum/viewto ... 0#p3633022
Essentially what he is saying is, dollar cost average and let it compound over time and let it do its thing forever (over 50 years in his case). Don't put all your eggs in one basket - i.e. he doesn't say to dump your entire life savings into the market all at once. Start small, put the first 30% of after tax savings first year. Then the next 30% of after tax savings the second year. Then the next in the third year... etc.
Even if the market were to drop 50% in the first or the second year of your investment journey, this will limit your exposure. And when the market does it again the next time in say, 5-7 years time, well, by then the gains in the investment maybe enough to offset the next 50% drop. Do this for the next 50 years and you may end up with 8 figure net worth, is essentially his argument and supposedly what he has done. In the mean time, you can live your life with remaining 70% of after tax income. And he rightly points out, as your career advances, your income should move higher.
P.S.> Here is an article on one CFA's analysis of Warren Buffett's prediction about Dow 1 million:
Predicting Dow One Million – Was Warren Buffett Being Bold or Overly Cautious?
https://www.financialsense.com/daniel-a ... y-cautious
Mister Imperceptible should take notes. 8)