Yes, you read that right. No, this is not some bombastic title meant to be click-bait. I will share my road to building a six-figure portfolio by age 23. The motivation for this article is for all the young astute folks out there, to illustrate that it's never too early to start investing. Note, some of my figures will be in Canadian dollars (local currency), so divide by US dollar/CA dollar exchange rate for American dollars. Also, note the portfolio is six figures either way.
My story starts at age 19 when I opened my brokerage account. I funded it with $10k mostly from money I made over summer jobs in my teens. I immediately converted that $10k into USD as the Canadian dollar was pretty much at par, and purchased 5 blue chip US companies: Wells Fargo (NYSE:WFC), Coca-Cola (NYSE:KO), Altria Group (NYSE:MO), Philip Morris International (NYSE:PM), JPMorgan Chase (NYSE:JPM). Keep in mind this first purchase was during the summer/fall of 2011 when everybody thought the US was going to default on their debt. I was in my second year of university at the time and after listening to saner heads like Warren Buffett I decided to start buying heavily. I was also obsessed with accumulating as many USD as I could since the Canadian dollar is rarely ever at par with the US dollar. 2011 ended and the portfolio was up 10% for a total value of $11.5k.
Summer 2012 rolled around and I managed to make $8k from working my summer job May-August, which I plowed into the same 5 US companies. By this time, my portfolio of $11.5k at the beginning of 2012 was up another 15% and combined with this new $8k I invested, my total value was at $21k. By the end of 2012, the portfolio ended flat with the same value of $21k.
2013 was a pivotal year for me; at the end of my third year of study, I landed my first summer job in my field of study of actuarial science. I was an actuarial assistant making $20/hour, a big raise from the $15/hour I averaged working on commission for the Canadian version of Best Buy (NYSE:BBY), (Futureshop). By the end of summer 2013, the portfolio was up another 10% for a total value of $23k and after adding in $13k from my summer job, the total portfolio value stood at $36k. By the end of 2013, I made one of the most pivotal decisions in my life when I decided to delay my graduation by a year and accepted a 1-year work contract with the employer who hired me for the summer. Also, the portfolio of $36k was up another 9% from the summer for a total value of $39k. At this point, the US dollar was starting to creep up and was trading at $1.14 Canadian dollars. Converting $39k USD to CAD yields $45k - almost halfway to six figures. Just to recap, all the purchases I've made thus far have been allocated to the same five US stocks, all converted to US dollars at an average rate of 1.02.
During 2014, I worked and managed to save $25k and plowed that into my portfolio which rose another 13%. Here are the numbers: the portfolio grew in value from $39k to $44k US and combined with the $25k CA I invested throughout the year ($22k US converted at an average of 1.15), the total value was now $66k US. The US dollar ended 2014 at $1.26 Canadian, so my portfolio was worth $83k CA at the end of 2014.
2015 was somewhat of a bittersweet year. I graduated university and started my full-time job in May. I was making more money than I ever had in my life, but the US dollar was appreciating like crazy against the CA dollar, which is good since I held all my investments in US dollars. Now the bitter news, I could not buy more US stocks since I did not want to buy while the US dollar was above $1.2 Canadian. So, with US stock on cruise control, I used the balance of 2015 to research Canadian companies. My US portfolio ended 2015 up 6% for a total value of $70k US or $98k Canadian. I also saved another $25k from working, so my total portfolio including cash was worth $123k Canadian - I officially crossed the $100k-mark in 2015 at age 23.
As for 2016, I decided to invest the $25k cash from 2015 into Canadian blue chips, Enbridge (NYSE:ENB), Toronto-Dominion Bank (NYSE:TD), Royal Bank of Canada (NYSE:RY), Bell Canada Enterprises (NYSE:BCE). I also invested the $40k I saved in 2016 from working into those blue chips as well. The US portfolio rose another 11% in 2016 for a total value of $77k US or $101k CA. The Canadian portfolio is worth about $65k CA today.
Here are the US and CAN portfolio holdings for those who are interested:
The point of this was to illustrate how building a six-figure portfolio by your early twenties is entirely possible. I don't claim to be special in any way as I'm sure there are other folks my age who've managed to do the same or better than I have. Yes, I got lucky buying stocks on the way up and yes, I got lucky with the US dollar appreciating, but strip out those benefits and my portfolio would be worth $113k Canadian; basically, just add the book values of the two portfolios together; this is what I would've had just holding the money I earned as cash. As it stands the two portfolios are worth $166k CAD, so investment gains account for $53k or approx. 1/3 of my current portfolio, while savings account for the other 2/3.
I'll also add that I didn't have to earn huge amounts of money, but I did have to save. Most young folks living at home with a university education in a field that is employable may earn a decent wage and can save at least $25k/year. I also live at home and try to bring my lunch to work, but I still go out on the weekends and enjoy life, so the key is to balance. You saw in my story, I started with the $10k from my first summer job and worked my way up saving as much as I could. Getting lucky with the timing helped push me over the $100k threshold when I was 23, but I would've reached the threshold just one year later at age 24, had I just sat in cash. As you read earlier, my savings account for 2/3 of my current portfolio and investment gains represent the other 1/3. Put another way, saving money is of ultimate importance and investing it in blue chip stocks will magnify your savings!
Disclosure: I am/we are long WFC, KO, MO, PM, JPM, ENB, TD, RY, BCE.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.