There are six important steps you need to take when building a £1 million portfolio, in this report we discuss each in turn.
1- Start early. £1,000 invested at aged 20 compounding at 5% would be worth about £7,040 aged 60. The same amount at the same rate but invested 10 years later would be worth about £4,322. ie starting early gives a 63% better result.
2 – Save. If you can only put away £10 a month you can create a portfolio. Even if some months eg Christmas it is hard, make it an intention and the pot begins to build.
3 – Take advantage of capital accumulation moments. Job changes with pay offs, bonuses, a win on the horses all of these can provide some funds for investment.
4 – I have made some good investments. I have also made some bad ones. But my worst losses are only 100%. Whereas gainers can keep on rising. I have, sadly, never bought a rocket ship which gains 100% overnight and then does it again next week. But I have been able over the years to buy some businesses that have given 40% plus in a year and do that again.
5 – Learn when to cut your losses and run your winners. Sometimes the market is wrong and we have a great idea that should be held and more bought. But if your investment thesis is wrong recognise this and move on.
6 – Take advantage of the money the government gives you for free. ISA’s, pensions etc can all be used to add to your gains.
Of these only item 1 is genuinely difficult to do. If you are already 30 you cannot become 20. But this only means that you need to do more of 2 – 6. I absolutely do believe that anyone who wants to can invest well and can build their own portfolio and with it their financial security.