Investing is a long process! One should enjoy the investing journey. But many investors do enter and exit their investments without proper reasons! If they stayed invested for long-term and treat “Volatility” as their friend, they would surely become rich in future.
Common investing principles every investor should kept in mind are-
- Insurance Before Investing– One should take health and life insurance as early as possible. By taking insurance you are protecting your family.
Your life cover would take care of your family in case of unfortunate demise of yours. Your life cover would be 15-20 times of your annual salary. Prefer “Term Insurance” as it covers risk component with less premium. Prefer “Online Term Insurance” policies as they are relatively cheaper. Disclose all your personal and health issues without hiding any facts while taking “Term Insurance”. It would be helpful in easy claim settlement if there is claim arises
Take “Health Insurance” at young age. At younger age, you would be healthy as a result premiums are low. As you grows older, risk coverage to all diseases would be covered. By taking health insurance, you are safeguarding your wealth from high hospitalisation expenses, if any health insurance arises! Don’t neglect Health insurance as it is a saviour to your wealth in hard times.
- Before investing, don’t ignore inflation– Some people tend to enjoy the “current moment” without thinking of future expenses! we are not saying it is wrong- Yes, you have to enjoy the life, but don’t ignore the impact of inflation on you and your family.
Inflation is a silent killer! It gradually decreases your wealth! we can’t control inflation! The only thing one has to do is investing in asset classes which gives better returns than inflation rate! Though it is risky, in long-term the asset class outperforms the inflation rate. Do remind this!
- Don’t Procrastinate– Delaying your investments thinking that “Aache Din Aagaya”(Good days will come)would spoil your corpus to a larger extent. Whatever the amount may be, “Start Small” and gradually increase your investments year-on-year.
Waiting for salary hike, best opportunities itself kills your investment corpus. “Invest with whatever you have is the best mantra to start investing”. At the same time increase your contributions when you have surplus money.
- Diversification is the key to wealth creation– In olden days, our grand mothers and grand fathers diversify their savings in jars, shelves, almaras and pouches etc. This is a traditional method followed by Indians.
But due to advanced technology, peoples habits have changed. when they earns decent returns in a particular asset, they are fond of that asset class and tend to invest in that asset class frequently.
But this attitude has to be changed! We must “diversify” our investments across all asset classes as we can’t expect which asset class would perform better in all conditions. By diversifying if one asset class under performs, the other asset class will help you to reach your goals in-time.
- Don’t enter and exit your investments without proper reasons– Some investors enter with grapevine news and after seeing volatility, they tend to exit the markets with the fear of losing their capital. This is the common mistake done by the investors.
Before making an investment, he should be clear on pros and cons of the instrument and he must be clear on why he was investing in that instrument and how long do he stay invested in that instrument.
After concluding his investment objective only, he should invest. Simply entering and exiting the markets with grapevine news would ruin his investment journey. He should have perfect knowledge on the investment vehicle, after gaining experience only, he should take a final call to enter and exit the markets