Charlie Munger, Warren Buffet's long-time business partner, and legendary investor, once said, "The first $100,000 is difficult, do whatever you have to do to get it." This is because after your portfolio hits $100,000, compounding interest takes on a new momentum.
According to the rule of 72 (look it up, it's a real thing), this $100,000 will double every 7.2 years at a rate of return of 10% (Divide the 72 by the interest rate to know when your money will double). The beauty is that each time it doubles, the next time will be compounded. Let me explain, after your first $100,000 doubles to $200,000+, with the dividends in your portfolio. The next double will be $400,000+, then $800,000+, and then $1.6 million+ over a total period of 35 years. This is why getting to a $100,000 portfolio is so important.
Ok now, let us talk about how to get there. The first thing you need to do is to develop an investor mindset. If you don't believe it is possible to get there, you will perhaps never get there. An investor buys things of value, hopefully at a low-cost basis, and sells them later at a higher value. In this case, we may not necessarily be selling, but bear with me. Once you have accepted that you deserve to be wealthy and that you, too, can be an investor, you are on your way to building that $100,000+ portfolio.
The next step is to focus on your ROTH IRA and brokerage account. You should be investing in your 401K/403B/457 up to the match, but we won't focus on that in this example. First, set up automatic contributions to reach the maximum to your ROTH IRA ($7000 maximum for 2024). Next, set up monthly contributions to your brokerage account up to an amount you can commit to each month. Now, you need to build that portfolio. You can begin by selecting index funds or their ETF equivalent. The next step is to select sector ETFs, which can include Energy, Industrials, Banking/Finance, Technology, Retail, etc. Next, you can add single stocks that you have researched thoroughly to increase that rate of return we talked about above to help you double your money faster (remember the rule of 72?).
This is how you build a $100,000+ portfolio. Before you know it, you will be on your way to a $200,000 portfolio and so on until you finally reach a multi-million dollar portfolio and eventually replace your income. If this helped you, please share it with a friend or loved one.
Dr. Boadu.
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