Investment Tips for Long-term Wealth Creation
June 12, 2019
No matter, if you are an amateur investor or a seasoned one, having a sound investment strategy is the key to accomplishing your financial goal and creating a wealth pool. This article explores a few tips for long-term wealth creation.
Most investors in India invest their funds in various investment schemes with the view to gain as much returns as possible in a short time. However, amateur investors often have unrealistic expectations from their investment, and it leads to disappointment. Long-term wealth creations require meticulous planning and choosing the right investment tool to suit your goals. Here are a few tried and tested tips that you can consider:
Starting early is the key
One of the most critical factors to accomplish your goal of wealth creation is to start early. As an investor, you must understand the importance and the power of compounding. Just as it is important to choose the right investment instrument, it is equally important to start early to give your investment enough time to grow and accumulate greater wealth in the long run.
Set a time-frame for every goal
As an investor, you may have different investment goals. For example, you may start investing in various instruments for your child’s future education, or you may be saving for your retirement. Irrespective of the goal, make sure that you set a time limit for the same. This will help you make the right investment decisions. Tying a time frame to the financial goals will also help you know the exact corpus amount and the number of years needed to achieve it. For all the long-term wealth creation plan, timely investment and investing in the right instrument is the key.
Have a good strategy in place for asset allocation
For all long-term investment planning and wealth creation, efficient asset allocation strategy is vital. This means that you need to know precisely how and where to invest the funds across different investment instruments like equity funds, debt funds, real estate, gold, etc. The right asset allocation has a significant impact on investment returns in the long run. Make sure that the asset allocation strategy you implement is in line with your expected returns, long-term financial goals and the risk appetite.
Invest in equity Systematic Investment Plan (SIP)
The equity funds, for long, have been the most reliable asset class for long-term wealth creation investing. One of the most significant benefits of investing in equities is that it provides inflation-beating returns in the long run. You can explore the option of investing in the Equity-Linked Savings Scheme (ELSS) to enjoy the dual benefit of long-term equity investment as well as tax benefits. No matter if you are a newbie investor or not, it is best advised to invest in the equities through SIP. This helps to negate the risk of market timing. Besides SIP allows you to have a disciplined approach towards the investment and creating the desired corpus by automatically debiting the pre-set amount from the bank account on the pre-decided date.
Never touch the emergency fund
Long-term wealth creation is not only about fulfilling the long-term financial goals, but it should also be about maintaining a sufficient emergency fund. Even as you stayed invested for the long term, it is essential to have an emergency fund, which should take care of all your household expenses for at least 5 to 6 months. Irrespective of the various actions you take to accomplish your long-term investment goals, make sure that you avoid touching the emergency fund as far as possible.
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