7 Investing Lessons From the Two Comma Club


When’s the last time you heard about someone reaching the goal of becoming a millionaire? Do you even think it's possible?

I certainly do.

Because over in the Bogleheads forum, which is frequented by average, everyday investors, a member recently shared how he reached the major milestone they call the "Two Comma Club."

This club is for people who have achieved a net worth figure with at least two commas in it (in other words, $1,000,000 and up). (See also: The Worst Investments You Can Make)

Here are the seven key lessons I learned from studying that post and comments to it.

1. Develop the Habit of Saving

In his very first post, our new millionaire said he was always a saver.

Being diligent in saving is the most important step in building wealth. It's even more important than finding the right investment.

Without any savings, you'll have nothing to invest — even if you have the "perfect" investment. But when you contribute to your investment accounts regularly, you harness the power of compound interest to boost your net worth over the long haul.

Here's another way to get serious about saving — when contribution limits for your retirement accounts increase, do what you can to max them out. Our millionaire used the extra money he got from pay raises and from paying off debts to do this.

2. Have a Purpose

Money is ultimately just a tool that'll help you achieve your other goals. So what are your life goals?

One commenter mentioned that after he reached $2 million net worth, he quit his executive position that kept him away from his family. Now, he can spend much more time with them.

Do you want to leave a stressful, unfulfilling job so that you'll have more time with your loved ones? Or do you want the ability to donate large sums of money to support a cause that's close to your heart?

Having a purpose in mind will keep you motivated to continue working hard when times get tough, and doing whatever it takes to reach your goal.

3. Learn and Get Help

Our millionaire said he didn't always know what he was doing. But he learned by reading good books and listening to knowledgeable people.

By doing this, he slowly got his financial act together. This shows that if you start early enough, mistakes aren’t fatal — as long as you learn from them and correct them.

So what's important to know when it comes to long-term investing? One major factor that influences how your investments will perform is your asset allocation. In other words, how do you divide your money between the two major types of investments — stocks and bonds?

If you'd like to learn the asset allocation that I follow, how this allocation has performed in the past, as well as how it's expected to perform in the future, check out the Core Four Portfolio.

4. Stay the Course

"Stay the course," was mentioned several times throughout the thread. All this means is to simply create an investment plan (such as the one modeled after the Core Four Portfolio), and then stick to it. Don't waver from your asset allocation when the market is going through a down period.

It's doesn't really matter how your investments perform in a year or two. Instead, it's more important that you stay invested over a decade or two. One commenter mentioned that it took 26 years of systematic investing in order to make it to the distinguished Two Comma Club.

5. Make Sacrifices

If something's really important to us, we'll do whatever it takes to make it happen. A commenter mentioned striving towards the Two Comma Club every single day.

Our millionaire made sacrifices by committing his future pay raises to paying off his mortgage early. That gave him the extra money to max out his retirement accounts and speed up his journey to financial freedom.

6. Surround Yourself With Like-Minded People

Birds of a feather flock together. By reading this millionaire's post, another commenter received encouragement and realized that the goal of becoming a millionaire was possible for him, too. Join an online forum such as Bogleheads for the motivation or form an investment club.

7. Once You Get There, Stay There

A commenter noted that the first part of your investment life is all about accumulating wealth. Once you've reached your goal, the second part of your life is all about not losing what you've worked so hard to gain.

How do you do this?

By continuing to do what you've been doing all along: Living below your means, paying yourself first, and managing your debt wisely.

For instance, since retiring, our millionaire is still in the habit of saving. He still develops savings goals for future spending. Yes, he's saved up for future vacations, car repairs, and property taxes among other expenses.

Which one of these seven investment lessons speaks the loudest to you?

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Guest's picture

If you are under 40, you should be planning on having more than $1 mil for retirement. For most people under 40, $1 mil is just going to be a step along the way if you want a comfortable retirement, especially if you are married.

Darren Wu's picture

Thanks for sharing Jenny.

I see your point, especially if you have more expenses than the average household.

Guest's picture

some years ago I read this idea about new parents. From day one a child is born, put $50 in their Roth or other investment vehicular. Do all index funds. Each month add $50. Stop when the child turns 18. By fifty or so they should have about $750,000 in the account. I know their are variable and market fluctuations, but I think it is a good, Doable , idea.

Darren Wu's picture

Great observation Charles.

Regular investing in a solid index fund lets you take advantage of the power of compounding to build real wealth over time.

Guest's picture
Heywood Jablome

A newborn isn't eligible for a Roth, or any IRA for that matter. You must have earned income in the year a contribution is made. ... Also, what's an "investment vehicular"?

Guest's picture

Great lessons in life! Sadly, we have to learn it the hard way. Among the lessons you enumerated, the habit of saving and investing is the closest in my heart. Now that we have achieved both, we see to it that we maintain them, if not increase them.

Darren Wu's picture

Great to hear that you've developed these good habits Cherleen.

Improving upon them will only help you achieve your goals sooner.

Guest's picture

Nice! Great summary of the takeaways from the 2 comma club posts at the Bogleheads site. I also enjoyed reading those threads, and would just add under "have a purpose" to try to estimate a number to shoot for. I'm only 26, but having a definite number in mind really helps w/ motivation.

Thanks for the great post!

Darren Wu's picture

Thanks for sharing your thoughts.

I agree that having a specific number helps with focus. If it's not a general number (like $1,000,000), then it's a number you've come up after performing more advanced calculations.

Guest's picture
Mark Ross

You made a great point there. Saving is really important before you start investing. A person should never invest in borrowed money nor stop learning or doing things that are good for his financial life.

Darren Wu's picture
Darren Wu

Thanks Mark. Yes, it's important to have an attitude of continuous improvement!