Creating a $1 million investment portfolio may sound out of reach, especially if you’re just starting out. But in reality, joining the seven-figure club is entirely possible with a well thought out plan, consistent savings and smart investment strategies.

While it may seem daunting, creating a million-dollar investment portfolio isn’t just for the rich and famous.

“Many people have a goal of hitting $1 million and it is a nice, round number to aim for,” says Jay Zigmont, a certified financial planner and founder of Childfree Wealth, a financial planning firm in Water Valley, Mississippi. “You may need more or less in retirement, depending on your expenses, but either way, it’s fun to say you’re a millionaire.”

Here are six steps to grow a million-dollar investment portfolio from scratch, including how to pick the right investments and set yourself up for success.

Create a solid financial plan

Before you get started, it’s important to set yourself up for success by getting other aspects of your financial life in order.

  • Track your expenses and create a budget: You’ll need a firm grasp on how much you’re spending before you can start investing. After you total up your monthly income, subtract all your monthly bills and expenses to create a rough budget. If the end number is low (or negative), find ways to cut spending so you can allocate more money to your investment portfolio.
  • Create an emergency fund: Building a $1 million portfolio takes time, so avoid tapping funds early by establishing a solid emergency fund first. Most experts recommend setting aside one to six months (or more) worth of living expenses inside a safe, easily accessible account, like a high-yield savings account.
  • Pay off credit card debt: Interest rates on credit cards are well over 20%, far outpacing the 10% or so historical returns of the stock market. To make the most out of your investing dollars, eliminate high-interest debt from your life as soon as possible.
  • Learn about investing: You don’t need a college degree in finance to amass wealth, but you should familiarize yourself with key investing concepts and terminology. Without a foundational knowledge of asset classes, what a brokerage account is, different types of retirement accounts and other basics, you could end up making costly mistakes.

Before you start investing, it’s also important to assess your risk tolerance and understand your time horizon.

  • Time horizon: Establishing a timeline helps you choose the right investments and accounts. You’ll need to be more aggressive with your investments if you plan to retire with $1 million early at age 50, for example, then if you plan to retire at age 70.
  • Risk tolerance: You might be able to achieve greater returns, but can you stomach the risk? The answer is different for everyone, though experts recommend investors taking more risk when they’re young and have decades to make up for potential losses, and less risk when they’re older and need access to cash for retirement soon.

As you start building your portfolio, keep an eye on your overall net worth, which is everything you own minus everything you owe. This will serve as a benchmark of your progress along the way.

Be consistent in saving and investing

The journey to a million-dollar investment portfolio begins with a single step — saving money regularly. The earlier you start adding money to your investment account, the more time your money has to grow. Compounding is a powerful force that can significantly boost your wealth over time.

Here’s an example to illustrate what a difference compounding can have on your money.

Let’s assume Sarah starts building her investment portfolio at age 25 with $5,000 and makes a contribution of $300 a month. Mike starts building his portfolio at age 40 with $10,000 and makes a contribution of $600 a month. We’ll assume they both earn an 8% return on their portfolios and they both want to access their money at age 65.

Sarah will have about $1.04 million by the time she turns 65. Meanwhile Mike, who started with twice as much money and invested twice as much as Sarah did each month, will have$594,847 by the time he turns 65. Sarah was able to nearly double what Mike earned by starting 15 years sooner. That’s the magic of compounding.

Dollar-cost averaging is another important concept for long-term investors. Movies and TV shows may lead you to believe that day trading and risky bets are key to making money in the stock market, but the truth is, consistently investing money over time is one of the best ways to build wealth.

Dollar-cost averaging is an investment strategy where you invest a fixed amount of money at regular intervals, regardless of market conditions. This approach helps reduce the impact of market volatility and takes advantage of market downturns by buying more shares when prices are lower and fewer when prices are higher. Over time, this strategy can lead to lower average purchase prices and better returns.

So how can you start consistently saving and investing? Here are some ways to achieve it:

  • Set up automatic transfers to your investment accounts to ensure consistent contributions.
  • Contribute to your workplace 401(k). The money never touches your bank account, so you won’t be tempted to spend it.
  • Consider increasing your savings rate whenever you receive a pay raise or windfall, like an inheritance.

You might not be able to contribute much to your portfolio when you’re just starting out in your 20s, and that’s OK, says Ryan Derousseau, a fee-only financial planner with United Financial Planning Group in Hauppauge, New York. The important thing is to consistently invest what you can as early as you can.

“There’s a rule of thumb that you need 25x your annual expenses to retire, but that can vary widely,” says Derousseau. “Instead, save what you can now, say 10 percent. Then as you get older, you can begin to narrow down the specific mark you need, allowing you to adjust your savings level when you still have 10 to 20 years of work left.”

Pick the right accounts

If you’re not investing inside a retirement account, you could be missing out on important tax savings.

There are two main types of retirement accounts: 401(k)s and IRAs. You can open a 401(k) with your employer (most companies offer them) or you can open an IRA on your own with a brokerage company like Fidelity or Charles Schwab.

  • 401(k): A 401(k) is an employer-sponsored retirement account that allows you to contribute a portion of your pre-tax income, reducing your taxable income for the year. Many employers also offer a matching contribution, which is essentially free money.
  • IRA: You can open an IRA at a brokerage company and enjoy more investment options than the funds available in your workplace 401(k). However, annual contribution limits are lower.

Both 401(k)s and IRAs enjoy tax-deferred growth, which means you don’t have to pay taxes when you sell investments for a profit within the account (though you will get hit with a tax bill when you withdraw the money in retirement.)

IRAs and most 401(k)s also have a Roth option. A Roth IRA or Roth 401(k) is funded with after-tax dollars, so you don’t pay taxes when you withdraw contributions. They aren’t subject to RMDs either, or a yearly amount of money you’re required to withdraw starting at age 73. This can make Roth accounts an attractive option for investors looking to avoid a big tax bill in retirement and minimize a tax bite when investing.

Retirement accounts are great for building wealth, but they’re not recommended for short-term goals, such as buying a house or saving up for a dream vacation. That’s because traditional 401(k)s and IRAs come with a host of taxes and penalties if you withdraw money from the account before age 59 ½.

For shorter-term goals, consider stashing money in a high-yield savings account or a money market account. If you’ve maxed out your contributions to retirement accounts and still have more to invest — or you plan to retire before the standard retirement age — a taxable brokerage account might be a better option.

Diversify your investments

Diversification is a fundamental principle of investing that can help manage risk in your portfolio. Exchange-traded funds (ETFs) and index funds are some of the best investments for beginners because they help provide instant diversification by spreading your dollars across multiple companies with a single purpose. In contrast to purchasing individual stocks, which only track the performance of a single company, these funds track the performance of multiple companies. ETFs and index funds are also known for their low fees and passive management style.

“Investing doesn’t have to be complex,” says Zigmont. “For many people, the best bet is to follow passive, long-term investing. In this approach, you can buy ETFs that invest in the entire U.S. stock market, set it and forget it.”

Another option is target-date funds. A target-date fund adjusts your investments gradually as retirement nears, shifting from riskier assets like stocks to safer options like bonds.

As you grow more comfortable with investing, you can explore investing in individual stocks. You can remain diversified by picking stocks across multiple sectors (such as technology, manufacturing and health care) or based on company size (large vs. small cap stocks).

Monitor and adjust your portfolio accordingly

Building a million-dollar investment portfolio isn’t a one-time endeavor. While you should avoid impulsively buying and selling inside your portfolio, it’s important to monitor your account.

Over time, you should make occasional adjustments, known as rebalancing, so that your portfolio stays aligned with your financial goals.

Rebalancing a portfolio means adjusting it to maintain your desired mix of investments. You buy or sell assets to keep your investments in line with your original plan, so that you don’t have too much risk or too little growth.

For example, let’s assume you originally had an asset allocation of 75 percent stocks and 25 percent bonds. Over time, your allocation has shifted to 85 percent stocks and 15 percent bonds (because stocks historically outperform bonds). Rebalancing involves selling some of those stocks and investing the money into bonds to bring your portfolio back to its original 75/25 allocation.

“If you’re taking a more hands-on approach to the account, then you should rebalance once or twice a year at the same time every year,” says Derousseau. “Make it a part of your regular yearly financial chores, kind of like spring cleaning.”

Speak with a financial advisor

While you can start building a million-dollar investment portfolio on your own, everyone’s financial situation is unique. Speaking with a qualified financial advisor can provide personalized guidance tailored to your specific goals and needs.

Aside from helping you develop an investing strategy, a financial advisor can also help you make tax-efficient investment choices and pick the right account to minimize your tax liability. He or she can also help you make adjustments to your plan after a major life event — such as marriage, divorce or a new baby — to keep you on track toward your $1 million goal.

If you’re interested in finding a financial advisor in your area, check out Bankrate’s financial advisor matching tool to find one close to you.

Bottom line

Building a $1 million investment portfolio from scratch may sound intimidating, but according to financial experts, the number is well-within reach for those who save early and consistently. By picking diversified investments and regularly monitoring your account, you can set yourself up for success on your journey to the seven-figure club.