To build wealth, I believe the best way is to start buying shares today. Whether it’s a bull, bear, or flat market, there’s money to be made if I approach it with the right long-term mindset.
Finding value in any market
While some money managers tout the benefits of index funds, as a Fool, I’m certain individual stocks can do better. After opening a Stocks and Shares ISA on Interactive Investor, I now have a wealth of investments to choose from. The key to my portfolio’s prosperity has always been looking for companies with a potentially profitable valuation.
For example, one hidden gem I’ve recently found is Alpha Group International (LSE:ALPH). With a price-to-earnings ratio of just 10.5 and a forecast of three-year average annual earnings growth of 44% by analysts, I don’t know many better investments on the market right now.
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The business is a dynamic financial solutions provider helping corporates and institutions manage financial transactions. Recently, the company has acquired Cobase, a multi-bank trading platform, which is one of the significant catalysts driving the strong growth forecasts.
The two professional bankers covering Alpha Group International think that this is a stellar investment right now. Their average 12-month price target currently indicates a 35.5% return.
However, the company does work in multiple jurisdictions, which opens up operational risks. With a smaller business like this that’s only been listed on the public market since 2017, I’d need to be careful not to have too much of my money invested in it.
High-growth, well-valued opportunities like I think this is are rare. Yet in all my years of investing, I’ve learned that I can always find ways to make money from shares whatever the condition of the broader economy. In fact, in a bull market, I buy growth shares while in a bear market, I buy value shares. Both strategies can help me to take home big profits in the long run. The important point is to keep adding money to my portfolio regularly.
Tricks of the trade
One of the most famous risk-mitigation tools is called diversification. The aim here is to own 10 or so different, high-quality investments across geographies and industries. That protects me from anything going wrong in one area.
Another great strategy for building wealth over time, especially for beginner investors, is pound-cost averaging. This approach involves starting with as little as £5k (or less) and adding part of my disposable income to my portfolio each month after payday.
Starting with £5k and investing an additional £177 each month over 30 years could grow my portfolio to £500k, assuming an average annual return of 10%. According to Standard & Poor’s, the S&P 500 has delivered an average annual return of around 10% from 1926 to 2022. So, by simply matching this, I’d still build a substantial portfolio. Of course, those returns aren’t guaranteed and I could also lose money.
It’s never too late
The earlier we start investing, the more money we can make. That’s because of the power of compound returns growing exponentially over time. However, it’s always better late than never.
If I was starting over today, Alpha Group International might be one of the first investments I’d make. It’s currently on my watchlist, and it’s potentially going into my portfolio in October.
