Simple steps for building an investment portfolio


When considering writing these articles, inspiration is very often drawn from our interaction with our clients. Much of what goes into these written articles that we publish is actually provided to us by our clients, their experiences and the behaviors we see when consulting with our clients.

This week I came across two such examples that got me thinking of the simple start-up step that anyone can use to begin the investment journey.

Before we explain what these two simple steps are, we need to lay the groundwork and briefly define what investments are and why they are needed:

In its most basic form, investing is when a person delays spending money now to not only put that money aside for another time, but also to try and make that money work to generate more money. money one way or another.

Why is it important to invest? Well, simply, none of us ever know what’s in store for us. We never know what financial emergencies may arise where we will need to access cash quickly.

For the record, I have a crystal ball in my office and let me tell you the only thing I have ever seen there is a distorted reflection of my face.

Step 1: Understand what you are spending your income on and never spend more than what you earn:

When consulting with clients, we have never spoken before, we always need to get a feel for the potential client’s cash flow. How much money comes home after tax and how much is spent? Are there formal methods used for saving and investing through direct debit agreements for example?

It still puzzles me when the person at the other end of the meeting table (or rather the computer monitor screen in the Covid-19 era where many interactions with customers take place virtually) don’t know not the simple basics:

  • How much do they earn after deductions.
  • How much they spend on average each month.

This is the first step in creating wealth! Understand your own cash flow.

Now, yes, some people may feel uncomfortable talking about these things, or even facing what they know to be true, because then they would need to face a difficult situation to to manage.

It can also be said that some of us think that we are in a situation where there is not much we can do to improve our financial situation, we have to pay home loans, put food on the table, pay for transportation. , pay school fees and so on. Now that may be true, but you should be able to get a feel for your financial situation so that you can then create a wealth building plan.

So my first piece of advice to everyone is to track what you earn versus what you spend each month. Watch it, it may take you 20 minutes per month. Create a spreadsheet on your computer, write it down in a book if you have to, tracking your income and expenses each month is vital.

Someone once advised me to treat my own cash flow like a business, prepare some form of management accounts every month, it doesn’t have to be a formal ledger, it has to be something where you can track what you earn versus what you spend each month.

Tracking what you spend versus what you earn is the first step to spending less than what you earn.

Spending less than what you earn is the most important aspect of building an investment portfolio and building wealth!

Step 2: Set some money aside for another day!

When my son was very young and attending preschool, they sang a song to help these very young children remember to put their toys away.

“Clean up, clean up! Put it away for another day!

We should adopt this to save money and sing:

“Save, save! Put it away for another day!

This week I came across two cases where our clients needed medical intervention. They were both members of the best medical assistants and the best medical regimes.

At the end of their hospital stays, they were faced with payments to be made to doctors and hospitals that were not covered by their medical aids.

This is when the money that has been set aside for another day pays off. Going into debt to pay medical bills just isn’t the best idea.

So when you are considering building an investment portfolio, just start by putting some money aside, where it can be easily accessed (a 24 hour calling account maybe a good idea) for those. types of financial emergencies.

How much money should you have in such an account? This is a good question that only you can really answer when you have a sense of how much you spend each month.

There’s no right or wrong answer here, it’s an amount you’re comfortable with.

Personally, I try to keep about six months of monthly spending, it’s not always easy and it’s not always possible but that’s what I’m comfortable with.

Hopefully this will give some insight into the fundamentals of an investment or wealth portfolio, especially to our young readers who are making money for the first time.

Very rich people in the world always make sure that they spend less than what they earn and that they always have money to cover for their short term needs, that way they can then focus. on long-term goals.


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