The Motley Fool

What size share portfolio do you need to be considered wealthy?

Most people would like to become wealthy, but how big does your portfolio need to be before you can be considered wealthy?

First, let me say that there is more to life than just the size of your share portfolio. I’d rather have a wonderful relationship with my family and friends than add a few extra zeroes onto my net worth.

There is no set numerical definition for being wealthy. Even if there were it would change every year due to inflation It would also be confusing for different countries and different cities with different purchasing power.

One (vague) definition is “having an abundance of valuable possessions or money”. To the people who wrote Millionaire Next Door, the definition of wealth is having a net worth of $1 million or more. 

In Australia we have asset tests for the age pension. Australian society has decided that an individual has too much wealth to receive the pension at a certain level.

To receive the full pension as a single you’re allowed to own assets worth $263,250 as a homeowner and $473,750 as a non-homeowner. A couple combined can have $394,500 as homeowners and $605,000 as non-homeowners.

To receive the part pension as a single you’re allowed to own assets worth $574,500 as a homeowner and $785,000 as a non-homeowner. A couple combined can have $863,500 as homeowners and $1,074,000 as non-homeowners.

In the superannuation system, each person is allowed to have $1.6 million of assets generating tax-free income before the rest is taxed.

With a 4% dividend yield, a $1.6 million portfolio generates an income of $64,000. According to the AFSA Retirement Standard, a couple needs $61,786 a year to have a comfortable lifestyle.

To me it seems as though you need at least $575,000 to be considered wealthy and perhaps as much as $1.6 million.

$1 million isn’t worth as much as it used to be because of inflation. Even once we get to that level of wealth I think it’s important to continue to slowly growth wealth and financial security.

Foolish takeaway

If you own a share portfolio worth at least $575,000 then good for you! You’ve built wealth well. I’d want shares in my portfolio like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) that are reliable, continue to grow dividends and would be safe in a downturn.

If you’re trying to grow your wealth, higher-returning shares should be your focus like Webjet Limited (ASX: WEB), Altium Limited (ASX: ALU) and WAM Microcap Limited (ASX: WMI).

5 stocks under $5

We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.

And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!

*Extreme Opportunities returns as of June 5th 2020

Motley Fool contributor Tristan Harrison owns shares of Altium, WAM MICRO FPO, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of Altium. The Motley Fool Australia has recommended Webjet Ltd. 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.

Related Articles...

Latest posts by Tristan Harrison (see all)