4 Sure-fire Investment Tips for Long-term Wealth Creation
“How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.” –Robert G. Allen
Who hasn’t heard of the famous adage, ‘a penny saved is a penny earned’? It was this insightful quote from Benjamin Franklin that inspired our parents to tell us to save more throughout our childhood.Therefore, we started putting away the spare change in a piggy bank,and as we grew up, this habit too evolved through the years. As responsible adults, many of us now save a portion of salary into bank savings accounts. Without a doubt, savings accounts are secure, traditional and offer a decent rate of returns. However, they are not powerful enough an instrument to help create wealth unlike ULIPs or mutual funds, simply because they have limited growth potential.
The rate of returns on bank savings is usually fixed. Therefore, you cannot rely on savings alone to accumulate wealth. Instead, you need to include other, more powerful investment instruments in your financial portfoliossuch as ULIPS or any otherwealth investment plan. Also, you need to develop strategies, implement ideas and perform due diligence as part of your wealth building process.
To help, here are a few excellent long-term investment tips to consider:
1. Define Your Goals
The journey of long-term wealth creation begins with a simple step: knowing your goals. Market experts cannot stop gushing about the fact that when you have a specific wealth-building goal in your mind, you can develop more decisive strategies to reach that goal within the set timeframe.
For example, when you know that you have to accumulate Rs. 10 lakhs to buy your dream car in say, five years, you can maximise your equity investments to match your goal more definitively. Therefore, you need to adopt a “why-how-what’ approach to define and invest towards a particular purpose.
In other words, you need to understand and draw the difference between your wants and needs. Moreover, you must seek answers to questions such as where to invest your hard-earned savings? For how long you should investfor? What is the potential of growth? etc.
Overall, you need to develop this mindset where you can focus clearly on your goals and understand your risk profile before choosing a particular savings investment plan.
2.Understand the Involved Risk
In India, most people make a common error in judgement of jumping into an investment process without understanding it thoroughly. You need to have comprehensive insights into how particular instrument works and what are the risks involved before you could decide on a specific investment strategy.
Therefore, you need to plan your investments depending upon the risks involved with clear objectives, instead of just randomly selecting instruments based on hear-say. You need to understand that savings and investments are not one-time actions. Instead, they are about developing a process that eventually evolvesinto a habit.
3. Invest in The Right Instruments
One of the basics of investment is that you never allocate all the savings into one instrument. Instead, you distribute your savings across different wealth-building tools such as ULIPs, pension schemes or mutual funds.
You must remember that asset allocation is a keymetric for efficient long-term financial planning, simply because it has a more significant impact on your investment gains than market timing.
Therefore, you need to invest in a wealth investment plan, which allows you to earmarka portion of your savings for emergency usage and short-term goals.
These days, reputable insurers such as Max Life Insurance have designed wealth investments plans that help you maintainliquidity in your asset mix and align your portfolio based on your financial goals, risk appetite and return expectations.
4.Review Your Investments
Given the high-risk, high-return nature of equity investments, you need to continuously review your finances to know whether they are working as expected or not. For example, popular wealth investment plans allow you to periodically monitor the performance of in-built fund options through their Net Asset Value (or NAV).
The NAV is a crucial metric that helps you estimate whether a specific fund option is availing positive returns or not. In case you are not satisfied with the fund performance,orif you see your investment getting significantly impacted by market volatilities, you can switch to another fund option that is not much impacted by the markets.
Wealth Creation is a Marathon, Not a Sprint!
Wealth creation is not something that happens overnight. Instead, it is something that requires disciplined savings over an extended period. You need to define your investment goals first and determine how are you going to achieve those goals.
Remember, each investment that you make must have a specific life goal attached to it. Having a goal-oriented investment strategy helps you to determine a definite amount of wealth and the time you need to accumulate it.
Subsequently, you must select an investment option that aligns with your vision and shows tremendous growth potential.