Building wealth on the ASX is not about finding one perfect share.

It is about putting together a portfolio that can keep growing even when individual companies disappoint, markets fall, or the economy changes.

That sounds simple enough, but there is a big difference between owning a collection of shares and owning a portfolio with a clear purpose.

Here is how I would approach it.

Build around your best long-term ideas

I would start with the companies I would be most comfortable owning for the next five to ten years.

These should be businesses with strong market positions, healthy balance sheets, and opportunities to keep growing earnings.

Examples could include companies such as Goodman Group (ASX: GMG), ResMed Inc (ASX: RMD), TechnologyOne Ltd (ASX: TNE), REA Group Ltd (ASX: REA), and Wesfarmers Ltd (ASX: WES).

They operate in different industries, but each has qualities that could allow it to become more valuable over time.

This is where a large part of the ASX share portfolio’s wealth creation can come from.

Give growth shares room to compound

A winning portfolio should probably have some exposure to faster-growing businesses as well.

Technology companies such as Xero Ltd (ASX: XRO), Life360 Inc (ASX: 360), and HUB24 Ltd (ASX: HUB) operate in markets where there is still considerable room to expand.

These shares can be more volatile, and valuations can move around quickly.

But if earnings grow strongly for many years, the eventual value of the business can look very different from where it started.

The important thing is giving successful investments enough time.

Selling a great company simply because its share price has already risen can sometimes cut short the most valuable part of the compounding process.

Do not let one idea control the portfolio

Conviction is useful, but concentration can become dangerous.

Even excellent businesses can run into unexpected problems.

I would therefore spread investments across different industries and earnings drivers rather than allowing one company or sector to dominate the portfolio.

Australian investors should also think beyond the local market.

ASX exchange traded funds (ETFs) such as the Vanguard MSCI Index International Shares ETF (ASX: VGS) or iShares S&P 500 ETF (ASX: IVV) can provide global exposure alongside individual Australian shares.

Pay attention to price

Quality alone is not enough. A fantastic company bought at an extreme valuation can still deliver disappointing returns.

I would rather keep a company on my watchlist than convince myself I have to buy it immediately.

There will usually be another opportunity. Results disappoint, markets correct, sentiment changes, and shares fall out of favour. Having cash ready when a quality business becomes more reasonably priced can be valuable.

Keep adding to the portfolio

The portfolio itself is only one part of the equation. Regular contributions can make an enormous difference over a long period.

Adding money each month or quarter means investors continue buying through strong markets, weak markets, recessions, recoveries, and everything in between.

Over decades, the combination of new contributions, rising company earnings, reinvested dividends, and compounding can become extremely powerful.

For example, $1,000 a month into an ASX share portfolio would turn into approximately $725,000 in 20 years with an average 10% annual return.

A winning ASX share portfolio does not need every decision to be right. It needs enough good businesses, sensible diversification, reasonable purchase prices, and plenty of time to compound.

The post How to build a winning ASX share portfolio and create wealth appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Goodman Group, Life360, REA Group, ResMed, Technology One, and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goodman Group, Hub24, Life360, ResMed, Wesfarmers, Xero, and iShares S&P 500 ETF. The Motley Fool Australia has positions in and has recommended Life360, ResMed, and Xero. The Motley Fool Australia has recommended Goodman Group, Hub24, Vanguard Msci Index International Shares ETF, Wesfarmers, and iShares S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

It was a busy week for Australia’s top brokers. This has led to a number of broker notes being released. 

Three broker buy ratings that you might want to know more about are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

Collins Foods Ltd (ASX: CKF)

According to a note out of Morgans, its analysts have retained their buy rating and $10.60 price target on this quick service restaurant operator’s shares. Morgans was pleased with Collins Foods’ trading update, highlighting that group sales are up 6.6% for the first 17 weeks of FY 2027. This is being driven by resilience in Australia and European same store sales improving markedly. In light of this, the broker sees value in its shares at current levels and is recommending them to clients. The Collins Foods share price ended the week at $8.47.

Liontown Ltd (ASX: LTR)

A note out of Bell Potter reveals that its analysts have retained their buy rating and $1.90 price target on this lithium miner’s shares. The broker highlights that Liontown’s valuation is lagging the recent recovery in lithium markets and expected tight fundamentals. In fact, it points out that the company’s shares were last trading at this valuation when lithium prices were significantly lower and its net debt was meaningfully higher. In addition, since then, the Kathleen Valley underground ramp-up has been further de-risked. And while it expects lithium markets to remain volatile, Bell Potter believes market fundamentals remain strong. The Liontown share price was fetching $1.23 at Friday’s close.

Qantas Airways Ltd (ASX: QAN)

Analysts at Morgan Stanley have retained their overweight rating and $12.80 price target on this airline operator’s shares. According to the note, the broker believes Qantas is one of the best options among the Australian industrials it has under coverage. It thinks the company is well-placed to benefit from resilient demand and pricing and expects this to help offset higher fuel costs. Morgan Stanley also believes the market is underestimating the earnings potential of the international business as premium capacity and new aircraft increase. The Qantas share price ended the week at $9.39.

The post Top brokers name 3 ASX shares to buy next week appeared first on The Motley Fool Australia.

More reading

• Buy, hold, sell: Flight Centre, Qantas, and Wesfarmers shares
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• 3 ASX shares just got big upgrades and are tipped to rise almost 30%
• Buy, hold, sell: Liontown, Collins Foods, and Goodman shares
• Buying Qantas shares? Here’s what happened with the ASX 200 airline in August

Motley Fool contributor James Mickleboro has positions in Collins Foods. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Collins Foods. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Financial shares led the 11 ASX 200 market sectors with a 1.97% gain last week.

Meanwhile, the benchmark S&P/ASX 200 Index (ASX: XJO) sank 0.95% to finish at 9,005.9 points.

It’s likely that investors buying the dip on bank shares were responsible for last week’s sector rebound after a difficult August.

Three of the four major banks were smashed last month after all of them reported significantly lower mortgage applications since May.

That followed the Federal Government announcing changes to capital gains tax (CGT) and negative gearing in the FY27 Budget.

James Gruber, CommSec Equity Market Strategist, said the financial sector was the worst performer of the August earnings season. 

ASX 200 financial shares lost 6.13% of their value over the month.

That performance left investors feeling wary of how the housing market downturn now underway may impact the banks’ profitability.

Then last week, the Australian Bureau of Statistics (ABS) released economic news that changed the outlook for the banks.

Resilient economy benefits bank stocks

The ABS revealed that gross domestic product (GDP) rose 0.4% in the June quarter and 2.1% over 12 months.

That was stronger than consensus expectations of 0.3% growth in June and 1.8% annual growth, and ahead of the Reserve Bank’s forecast of 1.9% annual growth.

The data raised the chances of another interest rate rise as early as next month, and higher rates can be supportive for bank earnings.

If the banks’ lending rates stay above deposit rates, which is the norm, then a higher cash rate can boost their net interest margins (NIMs).

A stronger economy can also be positive for banks because it typically means stable employment and resilient household spending.

That means people can keep up their repayments on their home loans and other debts with the banks.

Expectations of another rate hike pushed the 3-year government bond yield to 4.82%, and 10-year yields fell to levels not seen since 2011.

This is why the broader ASX 200 had its worst day in three months on the day the GDP data was released, and why it finished the week in the red.

Higher bond yields aren’t great for shares.

When investors can get a pretty high and virtually ‘risk-free’ return from defensive assets like cash or bonds, they can go ‘risk-off’.

That means they are less inclined to invest in shares, which carry a higher risk of capital losses.

Or they might rotate out of growth shares into dividend stocks or blue-chips with reliable earnings (such as the banks!)

This may have also supported ASX 200 bank share prices last week.

As for the rest of the market, 6 of the 11 sectors finished the week in the red.

Let’s recap.

Financial shares led the ASX sectors last week

Commonwealth Bank of Australia (ASX: CBA) shares rose 2.02% to $160.42, recovering some of their 9.9% tumble during August.

Westpac Banking Corp (ASX: WBC) shares lifted 3.13% to $34.96, taking back some of their 8.8% decline last month.

National Australia Bank Ltd (ASX: NAB) shares increased 2.51% to $39.25, pulling back some of their 6.5% loss during earning season.

Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares closed 3.32% higher at $37.95.

The ANZ share price fell just 0.3% last month as investors were impressed with the fruits of a continued reset under CEO Nuno Matos.

Macquarie Group Ltd (ASX: MQG) shares lifted 0.04% to $251.87, recovering a little of their 1% decline last month.

Bendigo and Adelaide Bank Ltd (ASX: BEN) shares rose 0.47% to $10.63, taking back some of their 6.4% fall in August.

Bank of Queensland Ltd (ASX: BOQ) shares lifted 3.89% to $6.68, wiping out their 1.66% dip last month.

Among the investment companies and wealth managers, Magellan Financial Group Ltd (ASX: MFG) shares fell 3.43% to $8.74.

Washington H. Soul Pattinson and Co Ltd (ASX: SOL) shares fell 0.25% to $44.22.

Among the financial services providers, AMP Ltd (ASX: AMP) shares jumped 5.08% to $2.48.

Hub24 Ltd (ASX: HUB) shares fell 3.58% to $73.81 and Netwealth Group Ltd (ASX: NWL) dropped 5.03% to $20.37.

Buy now, pay later company Zip Co Ltd (ASX: ZIP) fell 3.94% to $2.44 per share.

Among the ASX 200 insurance shares, Insurance Australia Group Ltd (ASX: IAG) rose 2.55% to $8.05.

The Suncorp Group Ltd (ASX: SUN) share price leapt 5.04% to $19.37.

Financial companies are among 40 ASX shares with ex-dividend dates next week.

ASX 200 market sector snapshot

Here’s how the 11 market sectors stacked up last week, according to CommSec data.

Over the five trading days:

S&P/ASX 200 market sector	Change last week
Financials (ASX: XFJ)	1.97%
Consumer Staples (ASX: XSJ)	0.88%
Communication (ASX: XTJ)	0.77%
Healthcare (ASX: XHJ)	0.43%
A-REIT (ASX: XPJ)	0.02%
Energy (ASX: XEJ)	(0.74%)
Utilities (ASX: XUJ)	(0.83%)
Industrials (ASX: XNJ)	(1.2%)
Consumer Discretionary (ASX: XDJ)	(1.79%)
Materials (ASX: XMJ)	(4.64%)
Information Technology (ASX: XIJ)	(5.21%)

The post ASX 200 bank shares led a financial sector rebound last week appeared first on The Motley Fool Australia.

More reading

• How to build a winning ASX share portfolio and create wealth
• If I invest $15,000 in CBA shares, how much passive income will I receive in 2027?
• Buy, hold, sell: South32, Australian Finance Group and Magellan shares
• Buy, hold, sell: Wesfarmers, Endeavour, Macquarie shares
• 8 ASX shares upgraded by the professionals post-results this week

Motley Fool contributor Bronwyn Allen has positions in Magellan Financial Group and Zip Co. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Hub24, Macquarie Group, Netwealth Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Bendigo And Adelaide Bank, Netwealth Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Hub24 and Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.