Two Not So Secret Ingredients For Successful Wealth Creation
by Anvesh Pandey - Feb 01, 20223 min read
Investing is about making money for tomorrow, not for today. It is a perennial dilemma faced by many, whether to book profits or delay the investment decision, in order to time the market, but majority of people have failed at it. History has taught us that nobody knows that when markets have made a top or will start correcting. Here are the two important ingredients of investing, which will help you to pave your way towards wealth creation:
Longer The Time Horizon, Lesser the Chances of Loss - Stop thinking of making a fortune in short term, not more than seasoned 1% traders make money by doing the short-term trading. The good thing happened is that retail investors have understood this phenomenon.
Mutual Funds diversifies risk and possibility of losses sharply falls for holdings 7 years or more. So, lean on these statistics to pave way for successful wealth creation. Also, we all have heard the story from our grandparents that slow and steady wins the race. Investors, who have tried making fast money, have in fact made huge losses. They have never returned to market, and blamed it on the markets for not being the right place. So, the right strategy is to invest in small quantities with discipline and grabbing the opportunity of correction in market to go aggressive. But only investors with long horizons can cross the winning line.
Follow Your Risk Profile - Whenever you invest money, there are a few things that you need to keep in mind. One of the most important things that you need to know is your risk appetite. What is your risk profile? How much can you afford to lose? In order to determine this, you first need to know the amount of money that you want to invest and what your total financial plan for the future looks like. Is it enough for monthly expenses or are you saving for retirement? All this information will help you determine what is your risk appetite. If you are investing a lump sum amount of money then it makes sense to be more cautious as compared to someone who is planning to invest regularly in mutual funds. Have a well-developed broad-based portfolio with multiple asset classes and this is truly achievable through Mutual Funds. Further, by taking SIP route, one can effectively manage market cycles.