There are few short cuts to building yourself a $1 million share portfolio, although the most important thing is to start!
If you haven't already started on your path to wealth creation, don't let financial year (FY) 2017 be another year that passes you by.
The sooner you start, the sooner you can reach your goal
Making a million dollars in the share market is no simple task if you're trying to do it in a hurry – so it's important to set realistic goals.
While you might not be a millionaire by 30 June 2017, with careful planning FY 2017 can certainly be a 12-month period that moves you closer to your ultimate goal.
There are many factors which affect the time it will take to build your wealth to $1 million, these factors include:
- your starting position
- your ability to save and invest a portion of your income
- the returns you can generate from your investment decisions
You need a plan
Let's assume you already have $100,000 in investable funds.
Furthermore, let's assume you can set aside $12,000 each year from your salary to add to your investment portfolio.
Finally, we'll assume you can successfully pick stocks which achieve a 10% per annum (pa) rate of return (we'll get to the 'how' in a moment).
Let compounding do the rest
Utilising the above framework and the benefits of compound interest, in just 18 years you will have grown your portfolio from its initial $100,000 to $1.1 million!
While having $100,000 to begin with and diligently saving $12,000 each year is no cinch, for most of us the hardest part of this exercise is achieving a double-digit rate of return over an extended period.
Although a 10% pa return is challenging, with careful analysis and judgement it can be achieved. Here are four stocks that have each produced exceptional long term total shareholder returns (TSR). They could have helped in the past with achieving millionaire status!
Commonwealth Bank of Australia (ASX: CBA) – 11.6% pa over the past decade
Amcor Limited (ASX: AMC) – 15.6% pa over the past decade
Cochlear Limited (ASX: COH) – 12.2% pa over the past decade
ResMed Inc. (CHESS) (ASX: RMD) – 11.8% pa over the past decade
