So you’ve worked hard for many years, accumulated a respectable level of wealth and surpassed the million-dollar marker. Kudos to you! You’re crushing it.
What’s your next target?
How about 10x?
Growing an investment portfolio from $1 Million to $10 Million requires more than above-average cash flow, it requires focus, discipline, and a little guidance, but your strategy doesn’t have to be complicated.
Let’s begin with a few basic assumptions:
Accumulation Target: $10,000,000 USD
Investment Time Horizon: 10 years
Net Average Annual Investment Return: 8.00%
Beginning Value: $1,000,000
Here’s the plan:
STEP 1: Commit to investing regularly.
Specifically, to accumulate $10,000,000 in 10 years according to the assumptions above;
- Invest a minimum $540,000 per year. Realistically, this is doable if your income exceeds > $1 million+ per year and you’re serious about delaying gratification in the name of financial success.
It may be useful to keep track of your expenses throughout the year if you are unsure about your spending habits by using a budget calculator.
Since you’re likely to be short on time, consider employing a bookkeeper or business manager/CPA to help you review a personal P&L and Balance Sheet on a regular basis, just as you would your business financial statements.
STEP 2: Select the Appropriate Mix of Investment Vehicles.
You have many options to consider. Here are a handful of excellent options:
Executives, Physicians, Law Partners or w2 Wage Earners:
- Maximize your employer-sponsored pre-tax Investment Vehicles:
- 401k/Keogh Plan
- Deferred Compensation Plans
- Pension Plan
- General Investment Account (i.e., Non-Qualified Brokerage Account)
Entrepreneurs:
- Consider sponsoring a combination of income tax-efficient* Investment Vehicles:
- 401k/Profit Sharing/Keogh Plan
- Deferred Compensation Plans
- Pension Plan
- ESOP
*Consult with an experienced ERISA/Tax Attorney or Advisor to assist with plan design, implementation and administration.
- General Investment Account (i.e., Non-Qualified Brokerage Account)
- Charles Schwab, Vanguard, Fidelity, and Betterment are a handful of reputable custodians.
STEP 3: Emphasize Simplicity & Invest with Conviction
Invest with conviction and be wary of trendy, complicated, and conflict-ridden investment strategies. Focus first on investing in a diverse collection of incredible businesses you understand and that align with your personal values.
Sample Portfolio
- 80% US Equities
- 20% Non US Equities
Rebalance Periodically
- Buy Low (and Sell High if necessary) to ensure you maintain your desired investment mix, no less than a few times per year.
WARNING: As an accredited investor and possibly a qualified purchaser, you may have access to private limited partnerships, Hedge Funds, Private Equity, Venture Capital, etc. These options may appear sexy, exclusive, and unique. Consider investing in such vehicles only after you’ve built a growth-oriented foundation of high-conviction liquid investments that are simple to understand. Also, consider investing in illiquid vehicles only if you completely understand the strategy, fee structure, management, and liquidity constraints all of which are often incredibly complex.
If you desire investments beyond liquid, equity investments and are not keen to participate in Limited Partnerships, consider investing directly in a selection of real estate properties and/or businesses within your sphere of competence. Employ your accountant/bookkeeper to assist with keeping close tabs on your cash flow and ongoing rate of return.
Embrace the volatility. Be like Buffett.
It is inevitable the market will go up and down over the next 10 years. It’s even conceivable that amazing businesses may decline in value by as much as 50% during extreme periods of market turbulence! In times like these, do not panic. Trust the process and use the instability to your advantage. Ask yourself; what would Warren Buffett do?
He’d likely remind you to “Be greedy when others are fearful, and be fearful when others are greedy”. These are words to live by.
STEP 4: Maintain a cash reserve consistent with your needs.
How much cash or short-term reserves do you need to avoid disrupting your 10-year plan? If you have a secure/guaranteed source of cash flow, you can likely afford a minimal (1-2 month) reserve.
Conversely, if you’re an entrepreneur and/or have intermediate financial goals on the horizon (e.g., buying a house, starting a new business), maintain an appropriate reserve consistent with your specific expenditure.
Otherwise, your 10-year investment plan is not your reserve under any circumstances. This approach may help you maintain the long-term perspective and patience you’ll need to achieve investment success and avoid allowing temporary negative events from interfering with your long-term plan.
STEP 5: Consolidate your accounts today and/or recruit a team of professionals to help you activate your 10-year plan and stay on course.
- Of course you can do this yourself. Thanks to incredible Fintech innovations, you can activate an investment account in minutes and initiate your strategy on your own.
- Alternatively, consider a “Robo-Advisor” such as Betterment, SoFi and others designed to automate a strategy for you.
- Betterment, SoFi and other fintechs generally rely on mathematical algorithms and advanced software to build and manage your investment portfolio with minimal human intervention designed to take investor psychology (i.e., fear) out of the equation.
- For an even more customized investment strategy and holistic approach, consider hiring a credentialed financial advisor whose investment approach and values align with yours.
- Mind your fees and stick with a team of fiduciaries who have your back. Working with professionals should be all about win-win but be sure you maintain the lion’s share of the upside.
Bottom Line:
- Keep it simple.
- Invest $540,000 per year, every year, for 10 years.
- Invest for Growth.
- Invest with Conviction.
- Use market volatility to your advantage.
- Get started right away. On your own or with a professional advisor by your side.
The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.