The simple way to build a $1.1 million share portfolio

Credit: Angie Nan

If there is one thing that investors shouldn’t expect from the share market it is to get rich quickly. Having this mentality is bound to lead to disappointment.

Rather, investing is the most awesome ‘get seriously rich slowly’ strategy I know.

Wondering where to start?

Here’s a long-term strategy for wealth accumulation which could help you grow seriously rich…

  • Firstly, suppose you can save $10,000 – if you have already – well done, you’re well on your way!
  • Secondly, let’s assume through a diligent savings regime you are able to save $500 every month – this equates to $6,000 per year to add to your share portfolio.
  • Thirdly – and this is where it starts to get a little trickier – imagine you can achieve a return on your investments of 10% per annum. That may sound like a lot, and it is compared with the interest you’d receive on bank deposits, but for many investors it remains a long-term achievable rate of return.
  • Fourthly, we need the “magic” of compound interest to work for our portfolio. This “magic” has the greatest effect the longer we allow the compounding to continue for – so let’s give ourselves 30 years.

This strategy, as outlined above, means in total we save $190,000 to invest into our share portfolio. The beauty of compounding, achieved through a mixture of reinvested dividends and capital gains expands our wealth by an extra $971,458!

Ultimately, after just 30 years, utilising the above strategy you could created a portfolio valued at $1,161,458!

Of course, picking stocks that will give you long-term double digit returns is no easy task but just because it’s hard, doesn’t mean it’s impossible.

Consider the 10-year returns achieved from the following three widely known companies…

Global medical device manufacturer ResMed Inc. (CHESS) (ASX: RMD) has produced a total shareholder return (TSR) of 12.6% per annum (pa).

Global biopharmaceutical developer CSL Limited (ASX:CSL) has achieved a staggering TSR of 23.8% pa.

Global pizza franchise owner Domino’s Pizza Enterprises Ltd. (ASX:DMP) has provided shareholders with a massive TSR of 36.2% pa.

The future still looks bright

While it’s easy to identify top-performing stocks after the fact, it is of course much more difficult to accurately select the future’s top performing stocks.

One of the common themes prevalent across all of the above three companies is that they have global operations which provide a long runway of growth potential. As such, their prospects remain bright.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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