Authored by Satyen Kothari
Onwards and upwards! 2020 is about to end and it’s a great time to plan for the coming year. Irrespective of how 2020 has been, the coming year is an opportunity for you to reset, rethink and grow your wealth. The best way to move forward is to learn from our past and plan for the future.
Charles Dickens may have summed it up years ago when he said, ‘It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness.” The original quote is longer but this part of it pairs with 2020 the way champagne goes with caviar. So, let’s take a look at three simple lessons that can help us ensure you are ready to grow your wealth no matter what the next few years have in store for you.
You Can’t Time The Market
If this year has shown us anything it’s that one cannot possibly account for all possible factors that impact the financial markets. The markets are volatile and attempting to time them is foolish, to say the least. Even during the months, we’ve lived through in this pandemic, the markets have seen a lot. We saw a huge crash back in March 2020 and now in November 2020, the markets have recovered beyond the previous peak. Who could have predicted these market swings with absolute certainty? No one.
So, instead of trying to time the market and get rich quickly, become a regular investor. Invest a fixed amount with discipline every month and think of long term growth. No matter what ups and downs you see in the short term, consistent investors have historically reaped better returns than others. Rarely does one investment alone have an exponential impact on your fortune. It is always multiple quality investments that compound wealth over the long term. Stay the course.
Quality Trumps All
When it comes to picking investments there is nothing more important than picking quality assets. Purchasing bad mutual funds, stocks and other investments can do you more harm than good. The proof is in the pudding here! You must trust only expert advisors with proven track records. The aim is to pick the right investments and track progress. Moreover, the performance of your investments can change. What is a good investment today may not be a great one a few years from now. It’s important to have quality advice at every stage.
This is of course based on recommendations from our very experienced mutual fund advisory partner who has a track record of beating the market by 50 percent. Even if you already have a mutual fund and stock portfolio, you probably don’t know if it has quality investments.
Build A Perfect Portfolio
The only guarantee is that big changes will make the markets rise and fall. Whether it’s events like the 2008 crash or the recent volatility induced by the pandemic - big events will happen. Panicking when the markets fall or trying to jump in when they rise will never help. Instead, start 2021 with a resolution to create a Perfect Portfolio for yourself.
The process of building a perfect portfolio is easier than you might think. It is essentially a guided way to invest and prepare for your financial goals based on your personal money requirements and risk level. It takes into account your emergency fund needs, insurances, short term goals, medium-term goals and long term goals. This balanced and diversified approach builds an investment portfolio that can survive volatility without giving you sleepless nights.
Irrespective of whether you’re an existing investor or a new one, keep the three things listed above in mind. Most individual investors are not day traders or stock market aficionados. If you’re someone who is strapped for time and is looking for long-term wealth creation you don’t need to pore over long excels, graphs, ratios or battle with financial jargon. The path to wealth creation is simple - it's about being consistent and patiently investing for the long term. What better way to kick off the new year than to secure your financial future?
Satyen Kothari is Founder and CEO at Cube Wealth. Views are personal
First Published: IST