There’s no doubt that saving hard and investing in your ASX portfolio are key to long-term wealth creation and financial security.
But, it can be difficult to know what to do with your portfolio from month to month or year to year, especially with the current state of the markets.
With this in mind, I’ve looked at 3 tips to help you boost your chances of financial success and retire early on your own timeline.
1. Let your winners run, cut your losers loose
While actually buying and selling ASX shares in this day and age is very simple, the biggest hurdle to investing in the sharemarket is psychological.
It’s very hard to maintain your composure when your investment in Afterpay Touch Group Ltd (ASX: APT) shares has surged 173.25% higher since the start of the year.
The key to investing is to keep your fingers off the panic button, cut your poor investments loose and let your winners play out in the long-term.
After all, that’s why you invested in them in the first place right?
2. Work out how much money you need in retirement
While wealth creation is a positive journey for us Fools, we do sometimes run the risk of wanting too much without knowing why we want it.
The dream of owning the house and the boat might be great, but it’s worth stepping back and considering what you really want to use your hard-earned ASX nest-egg for.
For some this might be living on $20,000 per year in retirement and others might prefer a more lavish $100,000 per year.
Whatever your financial goals are, work out roughly what you need to live comfortably and use one of the many simply online calculators to work out how to get there.
For example, if you are 35 years old with a $200,000 share portfolio and realise you need $50,000 in dividend income to live on from 2050 onwards, you can then work backwards from an expected dividend yield to see how much you should be investing in shares.
3. Pay yourself first
This is a common tip that comes up in personal finance advice, and for good reason.
There is no point slaving away for every penny just to have millions to spend in retirement – and the reality is, much like strict dieting, it probably won’t work long-term.
Create healthy money habits, allocate your spending money and contribute to your ASX portfolio regularly, whether that’s buying beaten-down shares such as AMP Ltd (ASX: AMP) or dollar cost averaging into exchange-traded funds like Vanguard Australian Shares Index ETF (ASX: VAS).
For those wanting to kickstart their dividend hunt, these 3 ASX income shares are a great place to begin.
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Kenneth Hall owns shares of Vanguard Australian Shares Index. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO. 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 Scott Phillips.