Wealth is not created overnight. It is
usually created over time with effort and knowledge.
When investors make an effort and set
out to look for the best way to grow their wealth,
They often find the overwhelming amount
of available information somewhat daunting.
1) Have a long-term view
Block out short-term noise and focus on
the long-term investment goals. Market volatility is a part of investing and
often emphasized by the general focus on short-term events.
The good news is that you can reduce the
stress of short-term investment fluctuations by maintaining a long-term
investment horizon, preferably greater than 5 years. By focusing on long-term
goals, you can reduce the impulse to make emotional decisions, gain piece of
mind, and instill confidence in yourself and your investment strategy.
2) Diversify
To help reduce risk, your portfolio
should be exposed to a variety of asset classes, industries and geographical
locations to name a few.
3) Focus on quality
Quality endures. That’s why investment
success largely depends on holding quality investments
in a well-diversified portfolio. Whether
dealing with equity or fixed income assets, quality and attractive valuation
can be closely linked. When seeking investments that are attractively valued,
you should consider not only the price, but the overall attractiveness and
quality of the investment.
4) Avoid overconfidence
Overconfidence can lead to decision
making errors that tend to be very costly. Focus on time in the market, not
timing the market as a way to build your skills and ultimately, your wealth
over the long term. Approaching your investments with the knowledge that you
may not know as much as you think you know is a powerful step towards
accumulating and compounding your wealth.
5) Harness the power of compounding
Compounding is one of the most powerful
tools available to investors. What may seem like a small annual return can add
up significantly over time. However, to harness the power of compounding, you
require a long-term view. Investors who seek short-term returns may not reap
the benefits that compound investing can offer
6) Taxes should be secondary to your investment strategy
Investing with taxes as your primary
concern could lead to inferior rates of return. Simply put, if your investments
can generate greater after-tax returns, the concern about the amounts of tax payable
should be secondary, but not ignored.
7) Be informed and have a plan
An investment roadmap is paramount to
reaching your financial destination. Constructing an investment plan that looks
forward 5, 10, or 15 years is a good start. Not only will a planned, long-term
outlook provide clarity but it should guide you through times of unexpected
market fluctuations and help you avoid the temptation of chasing after the next
hot asset. In addition to benefiting from the advice that a financial advisor
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