Keys to Building Wealth Through Investments

An investment is all about building wealth. You buy assets with the goal of growing wealth over time, which can help you achieve financial independence and secure your future against inflation and unexpected expenses. Some of the best ways to build wealth include portfolio diversification, consistent investments, a concentrated focus on long-term growth and ongoing education on market trends and strategies. With these investment strategies, you can grow your portfolio over time and even through retirement.

If you need help picking investments, a financial advisor can help you build wealth with a personalized investment plan based on your long-term goals.

Investing Long-Term

To grow wealth, you almost always want to build your portfolio around long-term investments.

Holding your assets over several years gives you more room to invest in higher-return, higher-volatility assets like equities. This is because you can ride out downturns in the market while awaiting asset gains.

It will also allow your portfolio to benefit from compounding gains. Over the years, compounding interest will add to growth, helping you build wealth faster.

This is much different from short-term investing, which typically only lasts months, not years. Instead, long-term investing gives you the opportunity to invest in lower-volatility, income-focused assets. These can include the following:

These investment classes often don’t show their true value for several years, but with some patience, you can capture those gains over time.

The truth is, patience in long-term investing should be a guideline for all of your money management. This may be the single most important factor when building wealth through investments.

Save and Invest With a Plan

Make a plan for how you will save and where you will invest, then stick to it.

The corollary to long-term investing is short-term investing, typically accomplished through the practice of market timing. When you time the market, you try to buy and sell around current market conditions instead of following a long-term plan.

This is fairly common for higher-volatility asset classes, including the following:

Investors who try to beat the market almost always lose money, either in terms of opportunity cost or trading losses. This is because at any given time, countless other traders are also trying to time the market.

If any given asset sends a reliable signal about future pricing, every trader will react, erasing any opportunity for wealth creation. Therefore, if an asset’s price remains stable, it’s likely because its pricing signal is unreliable. This makes your buy-low,-sell-high strategy little more than guesswork.

Instead, make an investment plan for your savings and investments and stick to it.

Investment Plan Considerations

These questions can help you determine the best way to set up your plan.

How much will you set aside each month?
How much of that will be allocated to investments and how much to savings?
How will you manage risk, and how will that change over time?
What assets will you buy, and in what proportion with each month’s investment?
When will you sell or roll over given assets?

Stock Investing for Growth and Inflation Management

A financial advisor working with a client to select investments for growth and inflation management.

Equities are the most popular asset class for retail investors looking to maximize their returns. Overall, the S&P 500 has an average return of about 10% annually, which is significantly higher than other mainstream options.

Two important ways to invest in stocks include index funds and individual equities.

Many investors start building wealth simply by holding an index fund and investing in it long term. An index fund is a type of mutual fund or ETF designed to replicate the performance of a specific financial market index, such as the S&P 500.

Another way to build wealth is by investing in individual stocks. A strong stock can outperform the market average. However, it is usually best to do this with the speculative side of your portfolio. Individual stocks are subject to extreme volatility, exposing your investment to the risk of a market crash all the way down to zero.

Because of this increased portfolio risk, it’s critical that you treat this investment as the high-risk but high-reward asset that it is.

Bond Investing for Income and Stability

Bonds are another common asset class for individual investors.

In exchange for an up-front loan, the issuer promises to make regular interest payments over the duration of the bond. For most retail investors, the most common types of bonds are Treasury bonds and corporate bonds.

A typical bond will make interest payments either every quarter or every six months. This interest is expressed as an annual figure; for example, a $100 bond paying 5% interest will yield $5 in total payments over the course of that year.

In August 2025, the average Aaa corporate bond paid 5.45% interest. However, the actual interest for any given asset will depend on several factors, including the credit of the issuer, overall market conditions and the bond duration. A five-year short-term bond, for example, will pay less than a 20-year long-term bond, because the company pays more to use your money longer.

Bonds are generally strong assets for someone who wants a better return than simple depository interest. Investment-grade corporate bonds are considered very secure, and Treasury debt is considered a safe investment. The interest-bearing structure of bonds also makes them a good income investment. With these regular payments, you can create wealth from these assets without having to sell them.

Diversify Your Portfolio

Most retail investors hold a mix of debt and equity in their portfolios, which is generally a good profile for someone wanting to build wealth over time. Still, you have more options for asset classes than this. You can invest in assets like real estate, options and futures, but stocks and bonds are solid, asymmetrical assets.

Whatever the makeup of your portfolio, be sure to allow for diversification among your assets. Fund-based assets, such as ETFs and mutual funds, are typically good assets for inherent diversification in your portfolio.

However, remember that the narrower your field of investing, the more exposed you are to individual risks and downturns. For example, if you are invested entirely in one company, a single bad CEO can tank your entire portfolio. If you hold only equities, a stock market downturn will hit you particularly hard.

Balance this with your timeline and market goals. For example, say you are a retirement saver at age 35. Your diversification needs might be met by the basket of assets in an S&P 500 index fund. While this would put all your money into equities, you are not worried about a recession or a bear market with more than 30 years on your timeline. You can leave the money alone to recover from a downturn.

Be sure to pay regular attention to the markets and adjust your asset allocation strategy as time goes on. You don’t want to retire at 67 in the middle of a bear market, either.

Understanding Risk Tolerance and Asset Allocation

Before you decide where to invest your cash, it is important to understand your risk tolerance.

Risk tolerance describes your personal comfort level with the potential loss of funds in pursuit of higher returns. It is influenced by several factors, such as your age, income stability, investment experience and even your personality. This is not static, either; many investors become more conservative as they get closer to retirement or a major financial goal.

Your asset allocation should reflect your risk tolerance. This should be a mix of different types of investments, such as stocks, bonds and cash.

There are both aggressive and conservative allocations, which work differently.

Aggressive vs. Conservative Investments

Type of allocation	Example allocation	Benefits	Best for
Aggressive allocation	80% stocks, 20% bonds	Pros Can deliver higher potential returns over time Maximizes long-term compounding Cons Greater short-term volatility	Younger investors with decades before retirement
Conservative allocation	40% stocks, 60% bonds	Pros Typically produces steadier returns with less dramatic swings Helps protect principal while still generating income Cons May not grow as quickly	Those nearing retirement

The right mix for you depends on your time horizon, financial goals and comfort with market fluctuations.

Bottom Line

Financial advisors reviewing client portfolios.

When it comes to building wealth, there are several investment strategies you can utilize for your portfolio. More than anything else, plan to invest for the long run. Make a plan and then steadily save and invest according to that plan. Then, leave your money alone to grow. Slow and steady, as they say, wins the race.

A financial advisor can help you find the right financial strategies for your investment portfolio based on your age, income and financial goals.

Tips on Picking Investments

Diversification is often expressed as asset allocation. This is how you balance different assets in your portfolio based on risk, reward and other goals. Here’s how asset allocation can help you build wealth.
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