There is an old adage which goes, before you start on a journey, you should be clear on your destination. While I'm sure that was probably referring to a life voyage or maybe even a country road trip, it applies equally to an investor trying to build their portfolio for a successful wealth-building campaign.
After all, if you don't know where you're going, how will you know how to get there?
If you want to succeed, you can't simply throw your money behind any old stock and hope for the best. Investing requires a lot of planning and you need to be aware of what your goal is before you begin constructing your portfolio.
For example, you may be looking to grow your wealth slowly over the long term whilst minimising your risks. The majority of the Australian population falls under this "conservative" category to some degree. In fact, a recent survey by asset management firm Legg Mason showed that 79% of Aussie investors are investing to provide for their retirement.
Investors who fit into this category would likely look at acquiring companies like Telstra Corporation Ltd (ASX: TLS) or Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), which represent solid, foundational stocks that are more than capable of withstanding difficult market conditions.
Alternatively, you might be willing to take a slightly more aggressive approach, accepting a little extra risk in the hope of speeding up your returns. Younger investors often fit into this class given that they are in their accumulation years with long careers ahead of them.
These investors would more likely target companies which are more prone to growth. As a perfect example, they might look at buying Slater & Gordon Limited (ASX: SGH) or Cash Converters International Ltd (ASX: CCV) – both of which carry a higher level of risk, but also the potential to deliver market-smashing returns in the coming years.
