There’s no question that investing can be extremely complicated and often quite difficult. Even professionals struggle with the behaviour of markets and the financial industry as a whole. So, for retail investors, there’s no question that it can be complicated trying to figure out how to grow your portfolio optimally.
There are many factors that you have to keep on top of if you want to be successful. In addition to knowing the operations of the stocks in your portfolio and having an understanding of the economy and macroeconomic influences, you also have to pay attention to administrative details, such as taxes and other regulations.
These are crucial factors to think about to ensure your money can grow consistently over the long run.
And even if you are growing your money, if you aren’t growing it faster than the broader market as a whole, then you are leaving money and potential on the table.
For example, the TSX has gained 23.5% over the last year, so if your portfolio hasn’t grown by that much, it’s underperforming. And often, when investors are underperforming, it’s down to one common mistake.
How to grow your stock portfolio
The best way to grow your stock portfolio is through long-term investing, where you take advantage of compound interest. This is something that’s repeated by me and my fellow Fools time and again because it’s true.
Warren Buffett has shown the potential investors have when they invest in companies and hold for numerous decades. So, if you think your portfolio is underperforming, you could simply be moving in and out of stocks too much.
It can be tempting as an investor to continue buying and selling stocks as they change in price. Even for professionals, though, this can be very difficult.
So, the more you buy and sell, the harder it is to actually grow your portfolio. Because in addition to speculating on short-term price movements, you’re likely increasing the costs of your investments by paying commissions on each trade.
There are certainly times when investors need to make decisive actions. For the most part, though, you should be finding stocks you are happy to hold forever and then forget about them.
Investing for the long term
BCE is an ideal stock to buy for the long term, because it’s a high-quality business in an industry that’s not going anywhere. Since it’s a telecom stock, not only will its business be around for decades to come, but it actually has the potential to continue growing, which is why it’s an ideal stock for your portfolio.
50 years ago, when everyone had telephones in their houses, it may have seemed like these companies had little growth left. However, with continuous innovation in the sector, there has been a long runway for growth, and that continues today.
Everyone now has mobile phones, and having access to the internet is a crucial necessity. So, with more innovation over the coming years, such as the introduction of 5G, stocks like BCE are perfect investments for the long term.
It’s a highly defensive industry that will protect your money. But, most importantly, the stock will not only grow the value of your investment and your portfolio but also continue to return cash to you.
BCE is one of the top Dividend Aristocrats in Canada. On top of its current 5.5% yield, the stock has also increased its dividend by more than 25% over the last five years.
So, if you’re looking to grow your portfolio more optimally, I’d stick to long-term investments in high-quality stocks like BCE. It’s a much more efficient way to grow your capital.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Daniel Da Costa owns shares of BCE INC. The Motley Fool has no position in any of the stocks mentioned.