Yes, it is possible, and there are no ‘but’s. You don’t need so much money to build a large investment portfolio; all you need is the right strategy. As far as Wall Street is concerned, there are investors who started from the bottom, and now they are big. Building a large investment portfolio is about being strategic, disciplined, and decisive about your investments. It has little to do with how much or how little you have.
Even if you live from paycheck to paycheck, there are chances to build an extensive investment portfolio. In this case, you need a lot of patience to create, nurture and develop your investments. It would be best if you also learned how to take it one step at a time.
Steps to Creating an Investment Portfolio
The law of sowing and reaping is the law of nature. So building investment is a way of sowing your seed capital for a bigger gain. But if you don’t have a lot of money or live paycheck to paycheck, the bills might be too overwhelming for you to think of having an investment portfolio. However, there are ways you can create leeway for yourself. Below are steps to help you get started;
Step 1: Start with “automatic” savings. Always ensure that you can put away a particular amount of money, no matter how little. If you need to get rid of some expenses, or even do away with them now. All you need is a lot of discipline to get past this stage. You can start with as little as $10. The most important part is being consistent about stashing out that fund periodically.
One of the best ways to do this is to sign up for automatic payroll deductions from every paycheck you receive. You won’t see the money since it gets automatically deposited to your savings or investment account. It’s hard to spend money you don’t become emotionally attached to since you didn’t ‘see’ it.
Step 2: Start growing your accumulated savings in a compounding way. This means that you only put your money in saving wallets with a high-interest rate- wallets with compound interests. Other ways you can compound your funds are by;
- Buying stocks that allow for DRIPs- Dividend Reinvestment Plans. Many multinational organizations allow small investments in their stocks, and you can use your dividend to buy more shares. Over time, your investment will grow to the point where you can consider diverting it.
- Buying a sector of an investment market called ETFs- Exchange Traded Funds. You can buy this asset through a broker, and you can buy a single share. The good thing about this asset is that, like DRIPs, some ETFs allow you to use the dividend to purchase another share.
A consistent and proactive saving habit will increase the worth of your portfolio. Following the steps above, you already have an investment portfolio for yourself, leaving you with how to take your investment portfolio to the next level. However, to build a large investment portfolio with your limited funds, you must start increasing and expanding your portfolio.
How to Build a Large Investment Portfolio
Building a large investment portfolio is not rocket science. However, after creating an investment portfolio, the next big step is to increase your investments by reinvesting, diversifying your funds, and constantly raising the bar of your financial goals. Therefore, you need to understand the financial markets and the risk associated with each type of asset. Alternatively, you can seek the help of a financial advisor.
You can choose to go radical about investing because only then will there be a possibility of getting a very high return in the short term. Or you can choose to thread carefully, knowing how hard you worked to get that far. Of course, these choices depend on how much time you have or your level of risk tolerance, but the choice is all yours to make. More importantly, building a large investment is a conscious decision you must make, and you need to be strategic about it.
- Investment Planning
Deciding your financial goals will help you define clearly where you are and where you are headed. Afterward, you need to plan and be strategic about how you can make your dream come true. It would help to decide what asset you want to include in your portfolio. It would help if you decided which industries to put your funds into. To successfully develop a winning strategy, you need in-depth financial market knowledge. The better alternative is to have a financial advisor to help channel your funds in a way that places you at the best advantage.
- Investment Diversification
This is mainly the key to building an extensive investment portfolio. As you continue to reinvest dividends from your stocks, you should also extract funds that can be used to invest in other markets. You can never go wrong with a diversified portfolio, and here’s a quick way of diversifying your investment;
- Invest in different stocks from different industries. For instance, you can have shares in Cocacola, Tesla, Amazon, and Walmart simultaneously.
- Set some funds aside for fixed-income assets to reduce the rate of risks in your portfolio. Fixed-income assets like bonds can tie down your capital and reduce your portfolio’s returns. On the other hand, it gives your portfolio some level of balance and makes it less volatile.
- Set some funds for REITs- Real Estate Investments. REITs are one way to build a fantastic investment portfolio because they can make your portfolio less volatile and, at the same time, increase your total returns.
Assets That Makeup Your Portfolio
What makes up a great portfolio is the combination of any of these assets;
- Stocks: This is an investment to be part owners of an organization
- Bonds; This is a low-interest investment. It’s like loaning the government some money, and you can get periodic interest on the funds.
- Mutual funds: Some mutual funds like ETFs allow you to be part owner of a sector and are very useful in building an extensive investment portfolio.
- Real Estate Investment Trusts- REITs- These investments bring high returns and are less volatile than other investments. With REITs, you invest with commercial builders who use investors’ money to buy and build houses.
- Certificate of Deposits- CDs- This is a low-risk and, therefore, a low-risk financial asset that allows you to loan a financial institution some money for a term to get interest on the principal. This does not make your portfolio, but it is one of the assets that balance the volatility of your portfolio.
A significant investment portfolio is a function of timing, the right strategy, and discipline. It has little to do with how much you have or don’t have. Another essential key to building a large investment portfolio is investment diversification. As your investment grows, rinse, repeat- accumulate your savings and invest in dividend reinvestment plans. The more consistent you are at reinvestment, the more your portfolio grows, and you can have that dream investment portfolio.