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How to start building a $1 million portfolio in 2016

Truth be told, there are few short cuts to building a $1 million share portfolio but if you happened to put off taking your first steps to financial freedom in 2015, don’t let 2016 be another year that passes you by.

Why?

…because the sooner you start, the sooner you can reach your goal of a $1 million portfolio!

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 the end of 2016, with careful planning 2016 can certainly be a 12-month period that moves you closer to your 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.

Consider this…

Let’s assume you already have $150,000 in investable funds. Utilising a disciplined stock picking strategy you manage to achieve an impressive rate of return on your funds of 10% per annum (pa). What’s more, let’s also assume that each year you diligently save $15,000 from your salary.

Guess What?

In just 15 years you will have grown your portfolio from its initial $150,000 to $1,103,174!

While having $150,000 to begin with is no small feat and forgoing certain wants so that you can save $15,000 each year requires plenty of discipline, for most of us the hardest part of this exercise is achieving a return of 10% pa for 15 years.

A 10% pa return is certainly no slouch however with careful analysis and judgement it can be achieved. Here are four stocks that have each produced exceptional long term total shareholder returns (TSR) and could have helped in the past with achieving millionaire status!

  1. Ramsay Health Care Limited (ASX: RHC) – 24.4% pa over the past decade
  2. CSL Limited (ASX: CSL)24.3% pa over the past decade
  3. Domino’s Pizza Enterprises Ltd. (ASX: DMP) – 37.9% pa over the past decade
  4. Flight Centre Travel Group Ltd (ASX: FLT) – 18.1% pa over the past decade

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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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