Investing is not a one-time activity, it’s a continuous process. To be a successful investor one has to be disciplined, patient and show perseverance. A successful investor has their financial goal in mind. To achieve those important financial goals they develop some simple habits ultimately creating wealth for themselves.
Here are five simple habits that one should follow to become a successful investor.
First: Start Early and Invest Regularly: This is a very basic thing that one can do as an investor. One has to start early inorder to get the benefit of the power of compounding. The power of compounding is where one gets interest on interest and that interest is reinvested for a very long time. Imagine ₹ 100,000/- rupees invested today for the next 30 years which at a conservative rate of 12% will grow to 30 lacs. Hence it is important to start investing early and along with starting early it is important to invest regularly. Investing regularly increases the savings rate of an investor and ultimately adds to the corpus.
Second: Diversifying your Portfolio: Diversification is a key to good portfolio returns. There is an old saying which says “ Don’t put all your eggs in one basket “ which is a very important saying, an investor has to follow this when creating a portfolio. The reason is pretty simple: if you put all your investments in one asset class, you risk your portfolio with no downside protection. What are different assets available for an investor to invest, those are Equity, Fixed Income, Real Estate, Gold and Cash. One can invest in this asset class through different means. Now, If one asset class does not perform the returns from the portfolio get balanced out where else if you have invested all in one asset class and that asset class doesn’t perform you have risked your investment too much. A successful investor will always diversify his portfolio.
Third - Have a commonsense approach to investing: Whenever you buy a product or service, we ensure we buy a great quality product or service. The reason is very simple, quality products are durable and their life is long. The same goes for Investing. Whenever you are investing, invest in good companies. Creating wealth is a long-term thing and not short term. Imagine investing in a mediocre company, you will generate mediocre returns, sometimes such a company won't exist after a certain period. Also, when buying good businesses ensure you buy at reasonable prices and not buy at any prices (BAAP) good companies bought at reasonable prices deliver good returns. Good companies bought at higher prices deliver below-average returns, while those bought at discounted prices give the best returns. The market offers such opportunities many times. So it's just using your common sense and applying it to investing.
Fourth: Create a system to help you invest through common sense: To become a successful investor, ensure you create a system that helps you navigate all the noises in and around the markets. To name a few, Don't follow any tips, recommendations and opinions blindly, always do your research and analysis, set your financial goals, know your investment and time frame for those investments, always be patient, and test the waters before getting into the investment completely, keep educating yourself.
Fifth: Find a Financial Advisor: To create a system for common sense investing don't rely on yourself take the help of a financial advisor. Investing is more about the behaviour gaps of investors, it has to be more about EQ( Emotional Quotient) rather than IQ ( Intelligent Quotient ). A good financial advisor will help you to navigate through all the noise and help you achieve your financial goals.
The ultimate financial goal of an investor is WEALTH CREATION and these 5 simple habits will help you to become a successful investor.
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