How To Grow A $1 Million Portfolio

Joseph Carlson (Founder) 00:00.650

this is very specific this is for people that have below a million dollars invested today if you have below a million dollars invested by far the gap between your expenses and your income is more important than your rate of return now

Joseph Carlson (Founder) 00:16.370

every investor is focused on their rate of return we all want to be able to grow our assets as fast as possible we want to pick the best stocks as possible but that focus shouldn't be the primary focus if we're just getting started if

Joseph Carlson (Founder) 00:28.050

you're above a million dollars if you have like two or three million dollars then this isn't the case no longer does the gap between your income and expenses matter quite as much in that case your portfolio return is the primary focus but again most of us don't have a million

Joseph Carlson (Founder) 00:42.650

dollars invested and this is what we should be focusing on

Joseph Carlson (Founder) 00:45.930

almost every person that has a large portfolio has also had an active healthy stream of income to initially build it meaning that people that build up a million dollar portfolio typically have full time gainful employment and they have enough money to continually invest

Joseph Carlson (Founder) 01:01.770

in fact it's near impossible to invest your way out of poverty level income it can happen there's some people that got lucky but in most cases they have to take on extreme debt and they are the outliers that is survivorship in the majority of cases people do not invest their way

Joseph Carlson (Founder) 01:19.850

out of poverty level income

Joseph Carlson (Founder) 01:21.690

this is just one of the truths that people need to hear if you're in poverty level income meaning you have a really low paying job you're not making enough money to have any extra cash you need to work on it increasing your active income learning new traits looking for new

Joseph Carlson (Founder) 01:35.850

opportunities networking going to job fairs asking whatever you can ask to get into better opportunities

Joseph Carlson (Founder) 01:42.370

once you have better opportunities part of this is max your budget one of the things i look at with a great company is this concept called operating leverage

Joseph Carlson (Founder) 01:52.010

operating leverage is when a company like netflix is able to grow its revenue faster than its expenses for example if we look at netflix 's trailing revenue we can see that it grows at around fifteen percent

Joseph Carlson (Founder) 02:03.090

if we look at netflix 's content budget its primary expense it only grew at seven percent so netflix is growing its revenue at roughly double the rate of its expenses meaning that it's exercising operating leverage

Joseph Carlson (Founder) 02:16.690

operating leverage means that your expenses remain fixed or they grow at a slower rate than your revenue the results of operating leverage are incredible it means that operating margins increase meaning that the profitability of the company actually goes up over time that's why

Joseph Carlson (Founder) 02:32.010

netflix 's operating margins and profit margins have continually clicked upwards

Joseph Carlson (Founder) 02:36.250

when profitability goes up so does the cash flow

Joseph Carlson (Founder) 02:39.090

now these are principles that are applied to different companies that are highly attractive but they're also highly attractive in your personal financial situation you

Joseph Carlson (Founder) 02:48.010

should try to make it so that your personal situation has operating leverage meaning that as you get that next raise at your job as you take on secondary work or part-time work or contract work as you get extra income you should not grow your expenses at the same rate of your

Joseph Carlson (Founder) 03:05.250

extra income

Joseph Carlson (Founder) 03:06.050

it's OK to enjoy extra income if you have it but make sure that you're growing your revenue meaning your salary and income at a faster pace than you're growing your expenses never keep them one to one if

Joseph Carlson (Founder) 03:18.290

you earn an extra ten thousand dollars a year from your work and you spend that ten thousand dollars on doordash and starbucks and going out to eat every day all you've done is increase your living style temporarily and this is a big problem people have what's called lifestyle

Joseph Carlson (Founder) 03:32.810

creep anytime

Joseph Carlson (Founder) 03:33.650

we make extra money we're tempted to put that in our budget and many of us will end up spending it if we don't have excellent capital allocation if you're earning money for your household if you're the one in charge of capital allocation you need to be excellent at this you

Joseph Carlson (Founder) 03:49.130

need to look at where the money is coming from make sure that you have enough of it to go to investments before other things that aren't quite as necessary in the case of growing a portfolio faster many of us want to take shortcuts and there simply aren't any shortcuts in the

Joseph Carlson (Founder) 04:02.970

stock market

Joseph Carlson (Founder) 04:04.010

don't bother they don't exist don't try them if you see anybody trying to sell you a shortcut a get rich quick scheme a different course that will give you some fast track to wealth you're going to bit scam you want

Joseph Carlson (Founder) 04:16.970

to grill your portfolio do not increase risk increasing risk means seeking higher yields leveraging up speculative stocks using options etcetera risk does not result in faster growth that's one of the biggest misnomers in the market

Joseph Carlson (Founder) 04:33.690

howard marks pointed out aptly that if risk was a guarantee for faster growth then it would not be risk instead of taking on extra risk and thinking about growing your portfolio by having higher yields and leverage and speculative stocks or looking into options the better

Joseph Carlson (Founder) 04:49.650

approach at least initially is to look at growing your salary look at different opportunities try to bring on extra income that's something that you can control that has no downside