If you want to build a successful investment portfolio that can help your family amass capital, build wealth, generate income upon which to live, there are things you should seriously consider when it comes to it. This article will focus on the secrets to building a successful portfolio.
Decide Upon a Clear Objective for Your Investment Portfolio
Certainly, an investment portfolio should have clearly defined objectives. You need to know what you expect of your money. Otherwise, you are going to be like a rudderless ship at sea; no direction, no purpose.
Keep Investment Turnover to a Minimum
As the saying goes, don’t rent stocks, buy businesses. Turnover has been shown to correlate with poor investment performance.
If you aren’t willing to own a business for at least five years, don’t even consider buying shares unless you fully understand, and accept, that the short-term stock market is irrational, volatile, and unpredictable.
Control Costs By Keeping Investment Expenses Low
Every dollar you give up on fees, brokerage commissions, sales loads, and mutual fund expense ratio charges is a dollar that can’t compound for you. What seems like a small amount of money every year can end up costing you hundreds of thousands, or even millions, of dollars in lost wealth that you can never recover.
Never Overpay for an Asset
Price is paramount to the returns you ultimately earn on your investment portfolio and there is no getting around it. You cannot buy a stock at an earnings yield that is a fraction of the Treasury bond yield and expect to do well unless it is a turnaround situation or a start-up with a very high rate of growth.
Don’t Rely on a Single Investment or a Handful of Investments
There is no reason you should have a lot of your money in a single stock unless you are very good at business, could suffer the total loss of your principal, and have a full understanding of the enterprise. A successful portfolio is one in which the owner is unaffected if a single company goes bankrupt or cuts its dividend.
See Also: Steps to Building a Profitable Portfolio
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