But while most American families enjoy creature comforts, they yearn for a more enduring variant—the peace of mind that comes from knowing you have the financial freedom to pursue whatever life you want. That sense of comfort is more attainable than you might think. And the vast majority of millionaires attribute their investment success not to exotic instruments like hedge funds or private equity, but to tried-and-true buy-and-hold investing of basic stocks and bonds.

Here's are some key strategies for your portfolio: Sarah Fallaw, founder of DataPoints, a behavioral fi nance research firm that analyzes wealth potential , says the four key traits to making money are frugality, confidence, responsibility, and social indifference—that is, the strength to avoid fads. But this un derstates the real impact.

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Cut those expenses to 0. In fact, the median annual expense ratio for passively managed portfolios in the MONEY 50 , our recommended list of mutual and exchange-traded funds is just 0. Just ask millionaires themselves. Do You Have What It Takes To Be a Millionaire. Over the past 15 years—a period marked by extreme highs and extreme lows—a plain-vanilla basket of blue-chip U.

Stick to the plan. This is important because that self-assurance can prevent you from being whipsawed. Successful investors also have the composure to hang on to—and even buy—"out-of-flavor asset classes with poor prior performance," says financial adviser William Bernstein, author of The Four Pillars of Investing.

That is also critical, as Bernstein notes that asset classes "with below-average past returns tend to have higher-than-average future returns. Over the next 10 years, though, foreign equities are expected to outperform U. That's largely owing to being undervalued for so long.

Own up to your mistakes. There are going to be times when you make the wrong decision. The key is accepting responsibility and moving on appropriately. In stock picking, this can lead to hanging on to laggards out of pride rather than cutting losses.

Emotions can also creep in when you fall short of a goal. But what if you wind up gaining just 5.

Don't Screw Up Index Investing by Making These 3 Mistakes. You could try to make up for this shortfall by ramping up risk. Risk is the most important factor in investing, according to millionaires surveyed by the Spectrem Group.

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Focus on value funds with a long record of stability but whose holdings are less frothy. Don't forget dividend growers. Not only do shares of companies that boost their payouts beat non-dividend-paying stocks in the long run, but they outperform non-payers by 0. Among the best is T. Is Vanguard Index Fund Still Worth Owning? But with equities at record highs and investors flocking to Treasury bonds, these basic assets are frothy.

This requires more diversification, not less. Expand your mix of stocks and bonds. Add similar doses in global bonds, emerging market debt, inflation-protected Treasuries, high-yield debt, and bank loan funds to round out your bonds. While the average actively managed stock fund charges 1. While index funds are cheap vs. How Being a Boring Investor Can Make You Rich. A PNC survey found that only one in five millionaires says real estate accounts for most of his or her wealth.

Yet tangible assets such as investment properties do play a role in the strategies of nearly half of the wealthy, the U. Double down with a duplex. Save on costs with a duplex or a home with a rental unit , says financial planner Jason Dahl. Since the rental is part of your primary home, you can qualify for a mortgage with a lower rate—on average 3.

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