Ever wondered why only some people are rich while the others are not? HereÔÇÖs the reason.
Rich people make their money work hard for them, while the others just keep working hard for their money. This mismanagement of income does not allow the commoners to build any wealth. Just like the game of snake and ladder, they earn money on a ladder and lose it all down the snakeÔÇÖs throat.
Now remember this secret formula!
Well diversified investments + Small savings + Time = Wealth
To stay financially fit and build your wealth from there, you need to implement the following effective investment strategies.
Direct discretionary spending into investments
This strategy applies to those who complain of not having enough to begin investing. Remember that you do not need piles of cash to start your investment process. Just cut down on the non-essential luxuries and youÔÇÖll be surprised on how much excess money you are left with.
Craft a spending plan
Creating a spending plan is all about building financial discipline and facilitating better spending habits. Giving you a sense of control and purpose, this plan helps you proactively compare and contrast your expense options.
Begin investing today
Time is a key factor involved in creating wealth. You need to give your money enough time to roll and start multiplying. Hence itÔÇÖs always better to start investing as early as possible. Remember that the power of compounding increases when you stay invested on a long term basis.
DonÔÇÖt let your emergency stash be idle
You should have a crisis cash reserve that is safe, reliable and accessible in case of any emergencies. A simple rule of the thumb states that atleast 6 month worth expenses should be kept aside as emergency reserve cash. However to ensure that the stash doesnÔÇÖt stay idle you can invest them in the high liquidity financial instruments such as bank savings account or the money market (get the help of a financial planner!).
Diversify your investments
ÔÇ£DonÔÇÖt put all of your eggs in one basketÔÇªÔÇØ That is the most underrated, yet overused line, especially in an investment context. To reduce risk factors, you need to invest across a range of financial instruments such as stocks, bonds, mutual funds, private equity and other asset categories. Diversifying your portfolio is more an art than science. You need to take several factors such as your age, income stream and risk tolerance into consideration. However ensure that stocks form the cornerstone of your portfolio to maintain an optimum risk reward ratio.
Separate emotions from investment objectives
An old Wall Street adage goes like this. ÔÇ£Bulls make money. Bears make money. Pigs get slaughtered.ÔÇØ! Pigs refer to the emotional, impatient investors who take the market ups and downs personally. ItÔÇÖs impossible to buy low and sell high if you do not have a rational structure around your trading process.
Write down your financial objectives, think long-term and refrain from making rash buying and selling decisions. Or you can hire wealth management experts to ease out the entire process of making your money work for you.
Good luck with your investments!