Begin now and thank yourself later
There are no shortcuts to wealth creation and a person must remain invested to take the benefits of long-term compounding.
You simply can not avoid volatility in equity market. Accurately timing the market is extremely difficult hence one solution is to invest for long term and manage risk. The stock market generates returns because it is volatile. Because the stock market fluctuates, an investor can benefit from this volatility by investing systematically. SIP can be a great way to take advantage of market cycles.
Today investors are finding it much harder to stay invested due to an excess of information. Make purposeful investments, put more emphasis on a solid investing strategy than on chasing profits.
The world's most successful investors have one thing in common and that is their ability to stay invested for the long term.
Today, almost everyone can easily access the top performing funds and their past performance through online search through various websites. Then why is it that very few people are able to stay invested long enough to create wealth?
The answer is majority of the people fail to manage risk, Lack of patience and not discipline enough to tackle the ups and downs. Understanding your risk profile periodically is vital.
The secret to building long-term wealth is adhering to a robust investing approach on reasonable expectations. In order to develop investment resilience, one must stick to their investing journey despite of market volatility.
A well-defined investing roadmap serves as the foundation of any successful investing strategy. Budgeting of income-expenses, understanding risk profile, setting goals, period to achieve your goal etc.
Now, here's the thing: you have to get started right now if you want to accumulate significant wealth. You are more likely to make significant gains in the future if you begin investing early. It's all about compounding's magic. And what do you know? Given enough time, even a small investments can compound into a sizable sum.
A common mistake investors make is either taking excessive risk (investing based on short-term past returns) or being too risk averse (locking long-term investments in life insurance policies, FDs, PPF etc.). The difference between a 7% return and a 14% return over 20 years can be exponential. Investing in the right products will allow you to achieve financial freedom in your life.
Think about this way. A 10,000 SIP per month in mutual funds for 10, 20, 30 & 35 years could accumulate corpus of Rs.23 Lakh, Rs.98.92 Lakh, Rs.3.5 Crores & 6.43 Crores at 12% per annum.
Avoid getting caught in the "recommendation trap," when products take priority over your needs.
Investing without a defined goal significantly reduces your capacity to stay invested. These goals support the strategy for achieving them in the future.
Many investors either don't seek advice from professionals or totally rely on advisors to make financial decisions on their behalf. It is crucial that you seek assistance from a financial advisor who is a SEBI Registered Intermediary because this is your hard-earned money.
It's essential to carry out periodic reviews and make adjustments to your objectives in order to keep the road map updated. Any substantial event in your life, such as a change in income or expenses, the addition of family members, should be the basis for these reviews. It is not advisable to make portfolio adjustments solely on the basis of performance.
Invest in products that are transparent, cost-effective, effectively managed, easy to understand, and well-regulated. Your long-term goals may suffer if your portfolio contains an excessive number of products.
Do not mix insurance with investments: Avoid purchasing complex, hard-to-understand products, combining insurance with investing, and avoiding schemes that seem too good to be true.
Conclusion: Investors are encouraged to stay informed, focus on fundamentals, and be prepared for short-term fluctuations.
Source: Mr. Harsh Gahlaut, Co-founder and CEO, FinEdge