As a millennial, I tend to lack patience for certain things—like waiting for food at a restaurant. But for my financial portfolio, I recognize that patience is necessary. Building a financial portfolio is a commitment, not a task. It takes a tremendous amount of time.
As the saying goes, “Rome wasn’t built in a day.” The same goes for your financial portfolio. I’ve read and listened to a tremendous number of media outlets on how to build a portfolio. From all that, I’ve identified three key ingredients that I used to make my own: prepare for winter, look for growth, and be patient.
1. Prepare For Winter
I am not a weather expert, but no matter what part of the country I live in, I always know that winter is coming. I cannot control Mother Nature nor can I predict how harsh winter will be, but it will come—and I’ll need to be able to survive the storm. You should prepare your financial portfolio the same way. A good way to prepare is to put 50% of your portfolio in stocks and the rest divided between bonds, cash, and short-term investments.
When deciding what types of financial investments to partake in, make sure you have investments that can weather out the bad times. Investing your entire portfolio in stocks, for instance, can offer tremendous rewards. But when bad times come—and again, they will—will those stocks stay up in price?
2. Look For Growth
When I was driving around in downtown Chicago a few weeks ago, a well-known investor said on the radio, “Profits are the milk and honey of stocks.” That means they’re the great benefit of investing, and one of the key things to look for. If you invest in stocks, search for those with profits and those that offer dividends (i.e., money paid to shareholders). You want to check your portfolio at least once a year.
If you don’t see growth, there is no point in investing. It would be like watering a plant even if it doesn’t grow. What’s the point of feeding and nurturing the plant if it doesn’t produce results.
3. Be Patient
Patience is not a virtue I possess, but if there is one thing that I’ve learned from financial gurus, it’s that patience is key to investing. You can’t expect your financial portfolio to go from $0 to $1million in less than a year. If that’s the case, you might have invested in some Ponzi scheme.
I often say to people, the quicker you rise, the faster you fall. Take the time to appreciate the portfolio you have and ensure its making steady growth over time. If it doesn’t, it may be that you’re not investing enough in stocks or your 401(k) is not sufficient for your portfolio needs.
Also, don’t bother comparing your financial portfolio to someone else’s because everyone has different financial goals and needs. Some of us want to retire early; others just want to pay off student debt and live frugally. Build your portfolio based on your own needs, wants, and goals.
What are the foundations of your financial portfolio? Sign up or log in with your Salt account to share them in the comments!