Home Wealth Investment How to build a portfolio on any budget

How to build a portfolio on any budget

From $2,000 to $50,000

Jack Derwin

Digital Journalist, Your Money

Editor’s note: This article contains information only. It is not intended as general or personal advice. Your Money recommends seeking professional advice specific to your personal circumstances.


If you haven’t dipped your toes in it before, the sharemarket can appear an intimidating place.

After all, wild market fluctuations, surprise company announcements, government interventions, interest rate movements and rogue tweets from world leaders all threaten to send share prices sideways.

So too can one’s financial position pale in comparison to the enormous fortunes of investment gurus like Warren Buffett.

However, the trick is to simply begin.

“The most important thing with the sharemarket is just getting started,” Andrew Page, founder of investment social platform Strawman, told Your Money Live.

“[But] before you get started, make the biggest investment of all which is in yourself so make sure you do as much reading and educating as you can,” he explained.

And no matter how much you have to invest, you can build a portfolio on almost any budget.

$2,000

While ideally, a prospective investor would be looking to top up their portfolio in the future, $2000 is a start.

“Frankly you are going to find it difficult to diversify with that amount [but] a really easy hack is to use an ETF as a foundation… using a broad-based index fund,” Page said.

“Basically, it means you’re buying the whole market so you get instant diversification in one package.”

However, that doesn’t mean you can’t dabble in specific companies.

“It’s always nice to add a one or two specific stocks and I think a great place to start for someone is to go with some familiar names, maybe a Woolworths or Premier [Investments] who own Smiggle if you’ve got kids.,” Page said.

“It makes it a little more tangible.”

$10,000

Obviously, as you have more to sink into the sharemarket, your options also multiply.

“$10,000 is a really good amount and you can build a nice tidy portfolio with that, with maybe five or ten stocks,” Page said.

Importantly though, you need to be aware of diversification: you want to spread that money between stocks and sectors that aren’t related.

A technology company, for example, is unlikely to fall in value at the same time as a healthcare stock unless there’s an overall market correction.

The other thing you should be conscious of when picking specific stocks is your time horizon.

Generally, the longer you’re invested the better.

“You should approach this with a long-term timeframe. You need to come back to review this at least once every six months or so,” Page said.

“Don’t be afraid to change if things aren’t working out.”

$50,000

Just because you might buy five to ten stocks with $10,000, it doesn’t mean you should buy five times as many with $50,000.

Rather, you may want to invest more in each of those companies and add just a few new ones to your share portfolio.

After all, the more companies you own, the harder it is to keep track of them.

“The percentages are far more important here. The best money managers aren’t thinking of how many dollars in this or that, it’s how much as a percentage of your portfolio is exposed to this one stock,” Page explained.

You may want to think about this initial money in increments of say 5 per cent ($2,500) for example, putting more into the companies you are more familiar or confident of and less into more risky ventures.

Just as the more money you invest amplifies your potential windfalls, it also amplifies your risk.

“It’s a lot of money, you don’t want a laissez-fair approach to this,” Page said. “Do your research. The more engaged you are, the more likely you are to do better.”

You also might want to look outside the ASX200.

“There are 2000 stocks on the market and, while everyone spends a lot of time focusing on that top 200 or so, there are a lot of really exciting companies outside of that,” Page said.

“As a general rule they perhaps have a bit more risk than the blue chips but they do have a lot more potential upside as well,” he explained.

With a large amount of money to spread around, it’s also possible to take a basket approach to small caps investing.

However, if you’re not prepared to do a lot of research and aren’t interested in keeping across your share portfolio then there is also no reason you can’t hold a handful of broad-based ETFs that are less hands-on.

Watch the full interview above. 

Read more: Here are 3 stocks to hold for 10 years
More: Here’s why you should consider global stocks
More: 7 easy steps to build a defensive stock portfolio

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