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Investing regularly is a proven way for the average person to build wealth over time. However, building stock portfolios can be difficult. This is because most people have no formal training in how to do this. In this article, I’ll explain how I would build a wallet from scratch if I had to start over today.
Start by looking at the companies you interact with a lot
If you’re starting out with no investment experience, the first thing you should ask yourself is, “What companies do I use on a daily basis?” This is a good approach to take, as it limits your initial search to companies you know and know to provide important products or services.
For Canadian investors, choosing one of the banks makes sense. The Canadian banking sector is highly concentrated, with the six major banks serving most Canadians. If I had to choose one company from this group, it would be Bank of Nova Scotia. Based on valuation metrics, Bank of Nova Scotia offers significantly better value than its peers. It also offers great growth potential thanks to its focus on international growth.
Watch the list of Canadian Dividend Aristocrats
In Canada, a dividend aristocrat is defined as a company that has increased its dividend distribution for at least five consecutive years. It is important to note that there are other important considerations that investors should take into account when investing in a company. However, filtering companies by this requirement will provide a list of companies that have a management team capable of allocating capital intelligently.
At the top of the list, investors will find companies whose dividends have increased for several decades. Fortis is the company I’m most interested in, out of all the Canadian dividend aristocrats. It has the second-longest streak of active dividend growth in the country. Fortis is also known as a recession proof company. A regulated gas and electricity provider, it generally continues to see steady business even in the worst economic conditions.
Find out what the younger generation likes
If you want to add growth stocks to your portfolio, it would be a good idea to understand what the younger generation find valuable. In 2012, investors would have made tons of money if they had invested in companies like netflix, Amazonand Apple.
Today, Shopify seems to be very popular among millennial and Gen Z entrepreneurs. Shopify offers merchants an easy-to-use platform that can be set up in a single day. This allows even those who have no expertise in website development to quickly create an online store. Worldwide, over a million merchants trust the Shopify platform. This includes everyone from first time entrepreneur to large cap companies like Netflix.
There is no clear answer on how to build a portfolio. However, investors can make this task much easier if they start by looking at companies they already know and regularly rely on. Next, investors should research the dividend aristocrats that interest them. Finally, write down what the younger generation finds valuable.