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Highlights
- Adding high-dividend paying companies to the portfolio can do wonders over the long haul.
- To move fast on your way to your goals, keep channelising your savings on a regular basis into the stock market to ramp up your capital.
- The one-size-fits-all approach doesn’t work in financial markets, and you have to chart your specific course of action.
A six-figure portfolio could be a dream for some people, while surprisingly it is not as hard as it sounds to reach here, irrespective of your income. When it comes to growing your investments at a decent pace, investing in equities is probably the best decision one can make. History shows us that equities as an asset class outperforms every other asset class over a long period.
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Therefore, it is a no-brainer to tap the power of compounding via the stock market to get to the $100K mark. However, like any other financial goal, you would be needing a well-thought-out plan for your journey towards a six-figure portfolio with flawless execution. Also, the one-size-fits-all approach doesn’t work in financial markets, and your plan could be different from others for the same financial goal.
On that note, we have compiled a list of five tips that might come handy while charting your path for a $100K portfolio.
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- Cut down on brokerage
Brokerage on securities transaction is one of the major expenses you pay while going in and out of your investment. While other charges which are defined by regulatory authorities or the government stays the same, brokerages vary from broker to broker.
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Choosing a low-cost broker can help you save your transaction cost, which could turn up to be huge savings in the long run and positively impact your returns.
- Don’t ignore dividends
If there is “easy money” in the stock market, it’s probably the dividends on your investment. Dividends are profits that a company distributes to the shareholders as a reward for their investment in the company.
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Not all companies pay dividends, and adding high-dividend paying companies to the portfolio can do wonders over the long haul. Dividends add returns over and above the capital appreciation of your investment.
- Watch out for your taxes
Aiming for rapid growth of portfolio is not just about focusing on returns, but also about minimising your tax burden. Becoming a tax-smart person is probably one of the most underrated aspects of creating wealth in the stock market.
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Taxes alone can block your journey towards the $100K portfolio, if not paid smartly. It is better to understand the tax laws of your country and include tax-efficient investment in your portfolio.
- Keep bumping up your investment
The whole essence of investing in the stock market is to get the benefit of compounded returns. Compounding works in a non-linear way, in the sense that a slight increase in the capital, time or rate of return could result in an exponentially higher ending capital in the long run.
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Therefore, to catalyst your way to your goals, keep channelising your savings on a regular basis into the stock markets to ramp up your capital.
- Keep your risks in check
A lot of people in their quest to make big in the markets take exceptionally high risk, which generally leads to a major disappointment. Remember, the goal is to reach the $100K portfolio without losing your shirt.
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Also, losing big midway could take your financial goals almost out of your reach as it is not as easy to recover a huge loss as it is to make one. Also, even if you are able to pare your losses, you could not get the time back for investment. Therefore, it’s better to keep expectations real and invest wisely.
Bottom Line
Although it may sound hard to grow your investment portfolio to the $100K-mark, with a few financially sound habits and behaviour, it’s quite achievable.
Start early, directing savings to their portfolio and not taking blind risks do not require a very high financial acumen and could easily be done by a retail investor.
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