How to build an ASX portfolio you can stick with for 10 years

A good investment portfolio should do more than just look good on the day it is created.

I think it should also be something an investor can comfortably hold when markets fall, individual shares disappoint, and the latest hot investment starts grabbing attention.

Here is how I would build one with a decade in mind.

Start with businesses I genuinely understand

I would begin with ASX shares where I can explain the investment case without needing a complicated spreadsheet.

Coles Group Ltd (ASX: COL), for example, sells products Aussies buy regularly. ResMed Inc. (ASX: RMD) provides treatment for sleep apnoea, while Macquarie Group Ltd (ASX: MQG) has built expertise across banking, asset management, commodities, and investment markets.

The businesses themselves can be complex, but I want the reason for owning them to remain clear.

That makes it easier to judge whether something has genuinely changed when the share price falls.

Give the ASX portfolio several ways to succeed

I would also spread my investments across ASX shares that make money in different parts of the economy.

A portfolio dominated by one industry can perform brilliantly when conditions are favourable, but it can become uncomfortable very quickly when that sector struggles.

I would want exposure to areas such as healthcare, financial services, consumer spending, technology, infrastructure, and resources.

An exchange-traded fund (ETF) could make this easier. The Vanguard Australian Shares Index ETF (ASX: VAS), for example, provides exposure to hundreds of Australian shares through one investment.

I could then add individual shares where I have particularly strong conviction.

Leave room for growth

I think a 10-year portfolio should contain businesses that have somewhere to go.

That does not necessarily mean choosing the fastest-growing companies today.

I would look for businesses that can keep entering new markets, adding products, improving their operations, or becoming more important to customers. This might include ASX shares like Breville Group Ltd (ASX: BRG) or TechnologyOne Ltd (ASX: TNE).

A company that can repeatedly find sensible places to reinvest its money has a much better chance of being worth considerably more a decade from now.

I would also be careful not to fill the portfolio entirely with businesses that already depend on everything going right. Some balance between established companies and higher-growth opportunities can make the journey easier to tolerate.

Avoid constantly rebuilding it

There will always be reasons to change an ASX portfolio.

I would certainly sell if the investment case genuinely deteriorated. But I would not want ordinary volatility to turn a 10-year strategy into a series of short-term decisions.

Regularly adding money, reinvesting dividends, and allowing strong businesses to develop would be far more important to me than continually searching for something better.

Foolish takeaway

I think the best long-term ASX portfolio is one that gives an investor enough confidence to remain patient.

For me, that means understandable businesses, sensible diversification, room for growth, and a strategy simple enough that I do not feel compelled to keep changing it.

If I can build that portfolio and still feel comfortable owning it through difficult markets, I think I have given myself a strong chance of being pleased with the result 10 years from now.

The post How to build an ASX portfolio you can stick with for 10 years appeared first on The Motley Fool Australia.

More reading

• Could a September rate hike hurt your superannuation returns?
• By September 2027, $5,000 invested in Macquarie shares could turn into…
• How much superannuation do I need to earn $90,000 per year in passive income?
• Why I think the VAS ETF is a top pick for beginners and experienced investors
• Up 12%: Is there still value in Coles shares?

Motley Fool contributor Grace Alvino has positions in Vanguard Australian Shares Index ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group and ResMed. The Motley Fool Australia has positions in and has recommended ResMed. The Motley Fool Australia has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.