Most important ingredient to create a strong portfolio

Getting into a Investor mindset, staying invested for the long term and starting young can be summed up as a mantra shared by many.

I have really picked up a very difficult topic where I am not an finance expert but I will try to share a my experience along this journey through few basic analogies to highlight a fundamental ingredient to create a strong portfolio – Time and the power of compounding.

The early you start more successful you get, Albert Einstein called compounding as the eight wonder of the world and in investing it is the power of n that can make an exponential difference. Start investing early in you career can catapult your return by power of compounding works.

Consider an example John age 20, while in college did a few part time jobs to supplement his income started investing in stocks with $200 / month for next 15 years, assuming annual return is 5%, his portfolio is $53,881

Now lets talk his friend Frank, who got inspired by John started investing after 5 years assuming all other variables are same.

John’s portfolio is roughly $22k more than Frank’s when they both reach 35.

Historically, if you see all leading indices around the world have given more than 5% returns. Check out the leading indexes across the world.

  • Fundamentally sound stocks Latest example of COVID-19 pandemic which caused to markets to crash in Feb’2020 have nearly recovered to previous highs by May 2021. Staying invested in fundamentally sound index stocks, and averaging during market lows can be safe strategy without too much risk.

Lets see how, ASX 200 performed during the COVID-19 pandemic

Another example ASX Index stock NAB – hit a low of $14.27 on 23 March 2020 when the pandemic news spread and lockdowns were started, the stock has now nearly doubled at $28.68 as on 15 Dec 2021

Getting into a investor mindset is a foundation to build a strong stock portfolio, do check out this book on amazon which provides you a blue print to get started https://amzn.to/3E0heEv or you can also have a read through this book https://amzn.to/3dYVMVH by John C. Bogle who started Vanguard in 1974 and served as Chairman and Chief Executive Officer until 1996 and Senior Chairman until 2000

Disclaimer – The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. We use affiliate links to monetize our content.  We may receive a commission on products or services that you purchase through clicking on links within this blog.

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