When we think about money, all of us want to be wealthy and most of us would do anything to create that wealth. It’s easy to speak about building wealth, but it’s very difficult to achieve it. It takes a lot of smart work and a lot of your most precious possession – time. But, with discipline and a proper strategy to save and invest, even ordinary people like us can achieve incredible feats.
Investing may not come with a guidebook, but there are certain mantras that an investor can always adhere to for wealth creation.
“If you don’t find a way to make money while you sleep, you will work until you die.” – Warren Buffett. Wealth creation is not about putting a part of your remuneration in your savings account each month. Investing in wealth-creating assets, i.e., assets that deliver decent returns over inflation, and post-tax will help you create wealth over time. Investing in such assets, especially equities is like investing in other businesses – the money works for you and rewards you with compounding simply by not doing anything. Equity is perhaps the only investment that pacifies both inflation and market expansion in your portfolio.
“If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.” – Warren Buffett. It is not just important to invest but it is equally important to start investing from an early age as it will maximize your returns and you will benefit from the power of compounding. The benefit of compounding works very well for long-term investments. With 15% returns, a Re.1 investment would grow to just Rs.4.05 in 10 years and Rs.16.37 in 20 years. The real difference is in the next 15 years when this amount will grow to over Rs.133. That’s the power of compounding.
Entering and exiting the market with a short-term objective is not good for your financial health. As seen, you have to stay invested for the long term to create meaningful wealth. Regular and systematic investment for a long time is the ideal strategy for investing in wealth creation. SIP (Systematic Investment Plan) brings in discipline and helps to create wealth in the long run by investing in small amounts regularly. SIP also gives the benefit of rupee cost averaging, i.e., getting more units when the market is low and getting fewer units when the market is high.
Protection against income and cost shocks is just as important as investment protection. Insuring yourself and your loved ones against unfortunate events is the simplest and cheapest way to safeguard yourself and your loved ones. A sufficient amount of coverage for life, health, personal accident, critical illness, and motor insurance can protect you from financial shocks emanating from associated risks while also providing you with much-needed peace of mind.
There is an old proverb, “Don’t put all your eggs in one basket.” Diversification is an effective strategy to balance risk and returns in a portfolio with exposure to different asset classes and styles of investments as per your risk profile. The idea is to have assets with risk and return characteristics uncorrelated with other asset classes. Alternate options offer the power to build a resilient portfolio in dynamic and uncertain markets. Diversification can be across asset classes like equities, debt, and, if required & interested, gold and real estate. Within equities, diversification can be at many levels – country / market cap / sector /style level (value / growth), and so on. When investing with mutual funds, diversification can be easily done and with even more options.
Another golden rule for achieving your financial goals faster is increasing your investments as your earnings grow. Ideally, your savings ratio should follow/track the growth in your income. Once the basic needs are met and disposable income increases faster, it is only wiser to divert a huge chunk of that towards investments, else, there is a high risk it will be spent generously. One way of automatically ensuring that you are increasing your savings is to register your SIPs with the top-up option which automatically increases your SIP amount at a fixed frequency with a fixed amount.
In the journey of wealth creation, investors often redeem their investments to meet unplanned expenses. These withdrawals have a significant impact on your wealth creation journey as you are not just losing your present investment but also the many years of growth and compounding. Take that into consideration too. Fortunately, this can easily be avoided with Loan Against Securities or Mutual Funds. This alternative helps you avoid selling your investments, and is especially helpful when you need funds urgently and the markets are not right for selling. Explore this option with your financial products distributor.
Investing is one of the many tools that help build wealth and achieve financial independence. But, it also requires a good level of financial literacy and discipline to master the game. In the long run, however, follow these 7 Wealth Creation Mantras as guiding principles, consistently and in a disciplined manner. You can bet to come out wealthy at the other end of this journey. We strongly believe that a sustained long-term wealth creation journey requires a helping hand. A financial products distributor or an expert is strongly recommended. And if you want to invest in safe instruments that are most likely to help you with your financial goals, and wealth creation, and/or if you want to retire rich, kindly call us at +91 9820926446/7977061717 or mail us at chandrakant@ghanchiinvest.com Stay consistent and keep investing!
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