Do you know how they say that once you make enough money, your money then makes money for you? That is true. But for that, you need to make the right investment choices and build up a significant portfolio that can allow you to reach that level of financial independence. You don’t need six-figures at the beginning; you can start working towards financial independence even with a hundred dollars. What matters is how you invest your money, i.e., in which companies and at what time.
So if you are sitting on some cash, and you are eager to make a lot of money to achieve financial independence, then the right time to start is now. All you have to do is abide by the following guidelines, and you will be on your way to building up a six-figure investment portfolio.
Have a Lot of Patience
The first and most important thing to do is to have patience. A lot of patience. Going from a four-figure to a six-figure portfolio takes time, and impulsive decisions can only hamper the process. This means that you should only invest when the market conditions are right, and you should withhold investing when they are wrong. Waiting out the market downturns are the best option when it comes to new investments since it is better to wait for the right opportunity when the potential for profit is high.
Many investors tend to fall prey to the fear of missing out, and you must not do the same. Investing at the right time is crucial to minimize the risks. Hence, you must wait for the opportunities to present themselves before deploying your capital. Remember, prospects will keep coming, but once the money is lost, it won’t likely come back.
Build Up Your Capital
Building up your capital is crucial as well. This is especially important when you are waiting-out a downturn, as discussed above. There are three ways of increasing your capital: capital gains, dividends, and capital injections. That is, the more money you inject into your portfolio, the more money you will earn in terms of profits. This is how the rich keep getting richer, they keep building up their portfolio capital. Look at it this way, investing a million dollars in a safe portfolio that yields 5% returns are always better than trying to find the one company that promises five-times the return for an investment of S$10,000; such companies are rarely reliable and often end up claiming bankruptcy.
Find the Right Companies to Invest In
On the same lines, you should only invest in companies that you have thoroughly researched and studied. You should create a watchlist of all the desirable companies you come across, and keep a check on their financials, and when the right time comes, you must deploy your investments.
These companies should have a stable financial history and structure, and you should be willing to hold onto them for a couple of decades, at least, to enjoy significant returns. You must know these companies at the back of your hand, and you should be able to tell whether it is the right time to invest more money or get rid of some stocks when the price of the shares drops.
Here, you must not get distracted by hot stocks as they are generally high risk, and don’t offer long term returns. By investing in well-established stocks, you can enjoy reliable returns for many years to come.
Diversify Your Portfolio
When you start investing, your portfolio is likely to be narrow since you do not have enough capital just yet. But once you reach five figures, you should then focus on expanding your portfolio. This goes a long way in minimizing risk. Having S$10,000 invested in 2 companies has a considerable risk if one of the company’s stocks crash. However, if you have S$10,000 invested in 5 companies, the risk reduces significantly; if one of the company’s stocks crash, you still have four other companies to bank on.
Find the Right Broker
Now, if you decide to invest, you must do so only after you understand the Singaporean stock market well; otherwise, you stand the risk of losing all your money. A way to avoid doing this is by working with a reputable and reliable stockbroker. For a marginal commission, stockbrokers offer a variety of services from handling your portfolio to even storing your stocks without you needing a CDP account. If you plan to take this route, then it is crucial that you only choose stockbrokers who are well-reputed in the investment circle, and who offer the best services at the best prices. Working with the wrong broker can end up costing you a lot of money, and it can compromise your investment portfolio.
Never Stop Learning
After all, investing is a long-term strategy, and the market keeps changing every few months. Currently, the market is facing a downturn thanks to the COVID-19 pandemic, but experts suggest that in a few months, there will be an upswing in the market. Similarly, there are always ups and downs, along with various shifts in the market, especially concerning global trade. Here, your knowledge of the market right now will be pointless after a few quarters. Hence, you must keep learning about the market. This includes analyzing the up and coming companies and stocks, understanding the seasonal market behavior, and understanding how newer global norms can affect the market. Only when you know the market well can you make sound investment decisions that will work in your favor.
The idea, when it comes to building a six-figure investment portfolio, is not to jump on hot stocks, but to play the long con; investment should be a marathon and not a sprint. As long as you follow the guidelines by being patient and investing in the right companies at the right time, while working with the right broker, and diversifying your portfolio, you can easily achieve a six-figure investment portfolio in some years!
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